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 asset that can easily be exchanged for goods and services is called a.

Question # 2

The central bank and the government are working against each other if as the government cuts taxes the central bank

Question # 3

Which of the following is not an important variable in growth accounting calculations.

Question # 4

Consider the five panels of the figure on the previous page in which of the five would monetary policy be the weakest.

Question # 5

A decrease iin money demand other thing equal shifts the _____ curve to the

Question # 6

Over time the wealth of society increases and payments technologies get more efficient What is the effect on money demand of these two changes.

Question # 7

If Federal reserve conducts open market sales, the money supply ___ shifting the LM curve to the_____

Question # 8

A shift in tastes toward foreign goods ______ net exports and causes the IS curve to shift to the

Question # 9

Money's primary role in the economy comes from the benefits of lowering transactions costs and allowing specialization This function of money is called.

Question # 10

In the Keynesian corss diagra, an increase in autonomous consumer expenditure causes the aggregate demand function to shift up the equilibrium level of aggregate output to _______ and the IS curve to shift to the _______

Question # 11

A decrease iin money demand other thing equal shifts the _____ curve to the

Question # 12

If there is a financial panic and increased uncertainty about the return in the stock market and bond market what is the likely effect on money demand.

Question # 13

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 # 14

The function of money do not include.

Question # 15

An autonomous increase in the value of the domestic exchange rate.

Question # 16

Which school of economic thought suggested that one possible cause of inflation was a push from the cost side.

Question # 17

The equilibrium level of income is.

Question # 18

In the Keynesian cross diagram a decline in autonomous consumer expenditure causes the aggregate demand function to shift down The equilibrium level of aggregate output to ___________ and the IS curve to shift to the

Question # 19

The idea that the money supply should change to accommodate changes in aggregate demand is associated with the ideas of.

Question # 20

The government performs its redistribution function mainly through.

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Sr.# Question Answer
1 Suppose velocity is constant and the real income elasticity of the demand for money is less than one then estimating inflation as money growth rate minus real growth rate.
A. Overestimates inflation
B. Underestimates inflation
C. Is an erratic estimate of inflation
D. Remain an accurate estimate of inflation.
2 In the ISLM framework the decreasing investment spending believed by Keynes to be the cause of the Great Depression would be illustrated by a shift of the ____ curve to the.
A. IS ;right
B. IS ;Left
C. LM ; Left
D. LM ; Right
3 The purpose of financial intermediaries is.
A. To allow more saving than investment
B. To discourage consumption spending
C. To collect income taxes for the government
D. To serve are middlemen between savers and borrowers.
4 A shift in tastes loward foreign goods______ net exports and causes the quantity of aggregate output demanded to.
A. decreases ; rise
B. decreases ; fall
C. increases ; rise
D. increases ; fall
5 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
6 The function of money do not include.
A. an exchange of purchasing power
B. A unit of account
C. A medium of exchange
D. A store of value
7 In the case of an expansionary ___ policy the interest rate rise while in the case of an expansionary _______ policy the interest rate falls.
A. monetary ; monetary
B. monetary ; fiscal
C. fiscal ; monetary
D. fiscal ; fiscal
8 Consider the five panels of the figure on the previous page in which panel would the simultaneous imposition of restrictive monetary policy and expansionary fiscal policy cause the largest increase in interest rates.
A. Panel a
B. Panel b
C. Panel c
D. Panel d
9 An increase in money _______ shifts the LM curve to the _____ causing the interest rate to fall and output to rise
A. demand ; right
B. demand ; left
C. supply ; right
D. supply ; left
10 Money's primary role in the economy comes from the benefits of lowering transactions costs and allowing specialization This function of money is called.
A. Store of value
B. Medium of exchange
C. Standard of deferred payment
D. Unit of account
11 As the interest sensitivity of investment spending increase.
A. Monetary policy has a larger effect on output
B. Fiscal policy has a larger effect on output
C. The multiplier increases
D. All of the above
12 Identify the three motives of money demand.
A. Accumulative
B. Speculative precautionary
C. Speculative transaction precautionary
D. Precautionary special trisection
13 A Political problem with discretionary fiscal policy is the.
A. Contractionary bias
B. Big state bias
C. Expansionary bias
D. Over reaction bias
14 In the Keynesian cross diagram a decline in autonomous consumer expenditure causes the aggregate demand function to shift down The equilibrium level of aggregate output to ___________ and the IS curve to shift to the
A. rise,; left
B. rise ;right
C. fall ; left
D. fall ; right
15 An autonomous decline in the value of the Pakistan Rupee makes Pakistan goods _______ relative to foreign goods and results in a ______ in net exports.
A. Cheaper ; decline
B. Cheaper ; rise
C. dearer ; decline
D. dearer ; rise
16 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
17 When your grandmother keeps her savings hidden under her mattress she is using money as.
A. a standard of deferred panyment
B. A comfortable thing for sleeping
C. A medium of exchange
D. A store of value
18 The limit of an economy's total productive capacity at any given time is set by
A. The amount of money in circulation
B. Business demand for goods and services
C. The level of government spending and taxation
D. the quantity and quality of its productive resources
19 Which school of economic thought suggested that one possible cause of inflation was a push from the cost side.
A. New classical economists
B. Monetarists
C. Marxists
D. Keynesians
20 The quantity of money demanded increases with income Thus if income increases the opportunity cost of holding money demand and re establish equilibrium in the money market This relation is captured by.
A. An upward stopping LM curve
B. A downward sloping L curve
C. A downward sloping IS curve
D. The circular flow of money in the economy.

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