PPSC Economics Topic 4 MCQS Test Preparation

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MCQ's Test For PPSC Economics Topic 4 Monetary & Fiscal Policy

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PPSC Economics Topic 4 Monetary & Fiscal Policy

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Question # 1

An example of discretionary fiscal policy would be.

Question # 2

A decrease in autonomous consumer expenditure causes the equilibrium level of aggregate output to __________ at any given interest rate and shifts the _______ curve to the __________

Question # 3

What happens to the money supply if the deficit is financed by selling bonds to the central bank.

Question # 4

Aggregate output and the interest rate are ______ related to government spending and are ___ related to taxes.

Question # 5

Keynes suggested that ________ income households consume a ____ proportion of their income than ____ income households.

Question # 6

A monetary action consistent with the central bank selling bonds in the open market would be.

Question # 7

An increase in money demand other thing equal shifts the ____ curve to the___

Question # 8

A Political problem with discretionary fiscal policy is the.

Question # 9

One of money's primary roles in the economy comes from the use of money to transfer purchasing power to the future This role of money is called.

Question # 10

The money multiple tells us teh ultimate increase in.

Question # 11

Increasing the government budget deficit.

Question # 12

In the Keynesian cross diagram, a decline in autonomous consumer expenditure causes the aggregate demand function to shift ______ and the equilibrium level of aggregate output to.

Question # 13

During period of inflation

Question # 14

Fiscal policy refers to the manipulation of government income and expenditure to.

Question # 15

A decline in the money__________ shifts the LM curve to the ____ causing the interest rate to rise and output to fall.

Question # 16

The money multiplier is 4, and the money creating potential of the banking system is Rs. 40,000,000. The legal reserve ratio and the excess reserves are.

Question # 17

Automatic stabilizers

Question # 18

What major advantage of monetary policy over fiscal policy does this clipping underline.

Question # 19

Equilibrium in the money markets can be expressed by the equation i = 9k/h) Y -M/h. The slope of LM decrease when

Question # 20

The increase in base money divided by the corresponding induced increasing commercial bank deposits is the.

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Sr.# Question Answer
1 The real money demand doubles while the nominal money supply is unchanged what happens to the price level.
A. The price level increase by a factor of four
B. The price level doubles
C. The price level is unchanged
D. The price level falls by one half.
2 The IMF is an agency charged with providing.
A. Technical assistance to stock market and financial market problems.
B. Loans for post World War II reconstruction
C. Short term credit for international balance of payments deficits
D. Bonds denominated in U.S. dollars as a loan to LDCs
3 A bonds becomes a riskier asset the demand for money_______ and all else constant, the equilibrium interest rate
A. Rises ; rises
B. rises ; falls
C. falls ; rises
D. falls ; falls
4 The parable of Riding a Switchback suggests that stabilizing policy.
A. Is not sufficiently stimulating or contra citing the economy at any time
B. Is desirable
C. Is effective
D. Is stimulating or contracting the economy at the wrong times.
5 If the Central Bank wanted to decrease the quantity of money held by the public it would.
A. Sell government securities
B. Buy government securities
C. Lower the legal reserve requirement
D. Raise taxes
6 Fiscal policy refers to.
A. The actions of the central bank in controlling the money supply
B. The government's altitude to taxation
C. The spending and taxing policies used by the government to influence the economy
D. The governments regulation of financial intermediaries.
7 Which of the following causes M1 demand to decrease.
A. A fall in the tax rate
B. An increase in income
C. A fall in the interest rate
D. An increase in the use of credit cards
8 The quantity of money demanded varies.
A. Directly with both prices and output
B. Inversely with both prices and output
C. Directly with prices and inversely with output
D. Inversely with prices and directly with output
9 The aggregate demand curve is downward sloping because a higher price level.
A. Makes people wealthier and so they spend more
B. Causes higher wages and so people spend more
C. Cuts the real value of income and so people spend less
D. Decreases the real supply of money decreasing spending.
10 The equilibrium level of income is.
A. Rs. 360
B. Rs.600
C. Rs.440
D. Rs.500
11 The use of money is more efficient than barter because the introduction of money
A. Reduces the need for economic specialization
B. Reduces the need to exchange goods
C. Reduce the need for other stores of value
D. Reduces transaction costs
12 Despite an expansionary monetary policy an economy experiences a recession the recession could occur in spite of the right ward shift of the LM curve if
A. The IS curve shifts left ward
B. The IS curve shifts right ward
C. The money supply increase
D. Taxes are cut
13 In the Keynesian cross diagram an increasing investment spending because companies become more optimistic about investment profitability causes the aggregate demand function to shift ______ and the equilibrium level of aggregate output to rise and the IS curve to shift to the
A. up ; right
B. up ; left
C. down ;left
D. down ; right
14 By controlling the monetary base economists mean
A. Controlling the money multiplier
B. Restricting the amount of cash in circulation
C. Not allowing commercial banks to issue notes and coins
D. making banks keep a certain % of their assets as M0
15 A decrease iin money demand other thing equal shifts the _____ curve to the
A. IS ; right
B. Is ; Left
C. LM ; Left
D. LM ; Rfight
16 An expansionary monetary policy
A. Reduces interest rates
B. Increases real output
C. Shifts the LM curve to the right
D. All of the above
17 A decline in planned investment spending unrelated to the interest rate focuses the equilibrium level of aggregate output to ________ and shifts the _ curve to the _______
A. rise; Lm ; RIGHT
B. RISE ; is; right
C. fall ; IS; Left
D. rise ; LM; left
18 A decline in the money__________ shifts the LM curve to the ____ causing the interest rate to rise and output to fall.
A. Demand ; right
B. demand ; left
C. supply ; right
D. supply ; left
19 What happens to the money supply if the deficit is financed by selling bonds to the central bank.
A. The money supply increases
B. The money supply decreases
C. The money supply is unaffected
D. We cannot tell what will happen to the money supply
20 One of money's primary roles in the economy comes from the use of money to transfer purchasing power to the future This role of money is called.
A. store of value
B. Unit of account
C. Medium of exchange
D. Standard of deferred payment

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