PPSC Economics Topic 4 MCQS Test Preparation

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

Try The 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

Which of the following causes M1 demand is decrease.

Question # 2

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 # 3

Fiscal policy refers to.

Question # 4

According to Marshall the basis of consumer surplus is.

Question # 5

A decrease in the quantity of money supplied shifts the money supply curve to the________ and the equilibrium interest rate

Question # 6

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 # 7

Why do people keep currency in their pockets when bank deposits pay interest.

Question # 8

"Money deposited for a term is not left in bank vaults but is loaned out by the banks This means that is dollar on deposit can flow back into the banking system one or more times and that dollar can expand the money supply What cnterminlogy do economists use to refer to the proses described in this clip.

Question # 9

A decrease in fully autonomous investment other things equal shifts the ______ curve to the

Question # 10

The market price of bonds can fluctuate depending on

Question # 11

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.

Question # 12

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

Question # 13

What happens to the money supply if the deficit is financed by selling bonds to the general public.

Question # 14

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

Question # 15

An increase in the quantity of money supplied shifts the money supply curve to the_______ and the equilibrium interest rate

Question # 16

A decline in taxes __ consumer expenditure and shifts the _ curve shifts to the.

Question # 17

Increasing the government budget deficit.

Question # 18

Which of the followig does not shift the IS curve .

Question # 19

Money and income are.

Question # 20

Short run contractionary Fiscal policy would result in.

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Sr.# Question Answer
1 "Transactions" money is money used as a
A. Store of value
B. Unit of account
C. Medium of exchange
D. Standard of deferred payment
2 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
3 an asset that can easily be exchanged for goods and services is called a.
A. Financial asset
B. Barter like asset
C. Illegitimate asset
D. Liquid asset
4 A major advantage of monetary over fiscal policy is that monetary policy
A. Can be put into effect more quickly
B. Affects all sectors of the economy equally
C. Authorities are quicker to see the need for policy
D. Has a more direct and predictable impact on spending.
5 Those who favor setting the target rate of inflation at about 3% believe.
A. The cost of moderate inflation can be minimized by indexing the tax system and bonds
B. that the cost of going to 0% is very low
C. That moderate inflation increases money illusion
D. Believe that moderate inflation aggravates the time inconsistency problem
6 In the Keynesian corss diagram, and cline in autonomous consumer expenditure causes the aggregate demand function to shift _____ the equilibrium level of aggregate output to fall, and the IS curve to shift to the.
A. up ; left
B. up ; right
C. down ; left
D. down ; right
7 An increase in oil prices, such as the oil shocks in the 70 s, lead to _______ there by causing _____
A. A movement along the AS curve cost push inflation
B. A leftward shift int he AS curve demand pull inflation.
C. A right ward shift in the AS Curve cost push inflation
D. a left ward shift in the AS curve cost push inflation
8 An example of discretionary fiscal policy would be.
A. The operation of the welfare sate
B. The operation of the processive federal income tax
C. A tax cut adopted to stimulate consumption
D. An interest rate out in plummeted to stimulate consumption
9 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.
A. 40 percent and Rs. 4,000,000
B. 40 percent and Rs. 10,000,000
C. 25 percent and Rs. 2.500,000
D. 25 percent and Rs.10,000,000
10 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 __________
A. rise ; LM ;right
B. rise ; IS ; right
C. Fall ; LM ; left
D. rise ;IS; Left
11 The equilibrium level of saving is.
A. Rs.120
B. Rs.75
C. Rs.40
D. Rs.80
12 In the 1930s, when Keynes was alive a expansionary fiscal policy taking everything else constant would have led to.
A. A relative large increase in Y, a smaller increate n P
B. A relative large increase in P, a smaller increase in Y
C. Both Y and P increasing with an percentage
D. Only Y increase
13 "The earlier predictions underestimated currency in circulation and treasury balances at the Fed, both of which drained reserves from the banking system" Lower reserves means.
A. Lower interest rates
B. Lower money supply
C. Lower unemployment
D. Higher inflation
14 A major advantage of monetary over fiscal policy is that monetary policty.
A. Can be put into effect more quickly
B. Affects all sectors of the economy equally
C. Authorities are quicker to see the need for policy
D. Has a more direct and predictable impact on spending.
15 Given fixed exchange rates assume Pakistan initiates contractionary monetary ad fiscal policies to combat inflation. these policies will also.
A. Reduce a balance of payments surplus
B. Reduce a balance of payments deficit
C. Increases both imports and exports
D. Decrease both imports and exports
16 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
17 Money is
A. An indicator of the scarcity of wants
B. Anything that sellers accept i exchange for goods and services.
C. A form of barter
D. Anything that the government classifies as a trade commodity.
18 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
19 If the money supply change was correctly and fully anticipated for a change of M to MI new classical macroeconomics under the assumption of rational expectations would predict a movement from.
A. Pont Eo to point E1
B. Pont Eo to point E2
C. Pont Eo to point E3
D. Pont E3 to point E2
20 According to classical models, the level of employment is determined primarily by
A. The level of aggregate demand for goods and services
B. Prices and wages
C. Government taxation
D. Government spending

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