PPSC Economics Topic 4 MCQS Test Preparation

Punjab Public Service Commission, PPSC takes the competitive exam to offer the deserving candidates suitable positions in several governmental organizations. Candidates who are willing to apply for the coming PPSC examination session with the subject of Economics are advised to start their preparation as soon as possible. The reason behind this endorsement is that candidates with exceptional results secure suitable positions and the exceptional result is a result of exceptional preparation.

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

If the Bank of Pakistan wished to pursue a tight monetary policy is would.

Question # 2

The budget deficit tends to decrease when

Question # 3

The ratio of debt to GDP will be larger

Question # 4

A decrease in the quantity of money supplied shifts the money supply curve to the _____ and the LM curve to the

Question # 5

An increases in the quantity of money supplied shifts the money supply curve to the _____and the LM curve to the

Question # 6

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

Question # 7

The intersection of the IS and LM curves captures.

Question # 8

When the reserve requirement on checking deposits is 0.10 and the Federal Reserve purchases government securities values at Rs. 100,000, the MI money supply.

Question # 9

Which of the following would qualify as an aggregate supply shock.

Question # 10

The money multiple tells us teh ultimate increase in.

Question # 11

In the Keynesian cross diagram a decrease in investment spending because companies become more pessimistic about investment profitability causes the aggregate demand function to shift ______ and the equilibrium level of aggregate output to ______

Question # 12

A 15% VAT is a.

Question # 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

Question # 14

" A growing number of economists view the Fed's new willingness to take on more of the nation's debt as inflationary in the long run." This inflation worry is because.

Question # 15

According to the supply side model a reduction in the tax rate.

Question # 16

The largest source of tax revenue for the federal government is.

Question # 17

Increases in government spending increase interest rates and aggregate output in the ISLM framework this is a ____ shift of the _____ curve.

Question # 18

The opportunity cost of holding currency decrease when

Question # 19

By controlling the monetary base economists mean

Question # 20

An example of discretionary fiscal policy would be.

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Sr.# Question Answer
1 A shift in tastes toward Pakistan goods ______ net exports and causes the quantity of aggregate output demanded to______
A. decreases ; rise
B. decreases ; fall
C. Increases ; rise
D. Increase ; fall
2 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
3 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
4 When the value of the Rupee rises Pakistan goods become _____ expensive relative to foreign goods which ___ exports.
A. more ; iincreases
B. less ; increases
C. more ; decreases
D. more ; increases
5 The market price of bonds can fluctuate depending on
A. How many bonds were sold
B. Who bought the bonds
C. The amount of the coupon
D. The interest rate
6 A tax increase __________ disposable income ____ consumption expenditure and shifts the IS curve to the.
A. Increase; increases ; right
B. Increase ; decreases ; left
C. decreases ; increases ; left
D. decreases ; decreases ; left
7 A sale of bonds by the central bank should cause.
A. A fall in the interest rate
B. An increase in the money supply
C. A decrease in the reserves of the commercial banks
D. An increase in the commercial banks loans to the public
8 You move some of your savings account balance into your checking account.
A. M2 falls and M1 rises
B. M1 falls and M2 rises
C. M1 and M2 are unchanged
D. M1 rises and M2 remains unchanged
9 A Political problem with discretionary fiscal policy is the.
A. Contractionary bias
B. Big state bias
C. Expansionary bias
D. Over reaction bias
10 When a nations money supply is Rs.1200 billion and the nominal Gros National product is Rs.4800 billion the velocity of money is.
A. 0.25
B. 4
C. 0.4
D. Rs.4 billion
11 A decrease in the quantity of money supplied shifts the money supply curve to the________ and the equilibrium interest rate
A. right ; fall
B. right ; rises
C. left ; falls
D. left ; rises
12 Fiscal policy is purposeful movements in _____designed to direct an economy
A. Interest rate
B. Legal structures
C. Government regulations
D. D Government spending and taxes
13 During the early years of the Great depression there was a significant decrees n the the money supply that causes. the ______ to shift____
A. LM ; Leftward
B. LM ; rightward
C. IS ; Leftward
D. IS ; rightwards
14 Actual equilibrium is Rs. 1,500 billion and full employment is Rs. 2,500 MPC = 0.75 taxes are zero , and prices are adjustable To eliminate the observed deflationary gap , the government should.
A. Increase G by Rs.1,000
B. Decrease G by Rs.250
C. Increase G by less than Rs.100
D. Decrease G by more than Rs.250 but less than Rs.1000
15 a contractionary monetary policy
A. Reduces interest rtes
B. Reduces real output
C. shifts the LM curve to the right
D. All of the above
16 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
17 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
18 Believers in the monetarist rule assert that
A. Lags are long and variable
B. the economy cna be stabilized by automatic mechanisms
C. The central bank should keep the money supply growth constant
D. All of the above
19 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.
A. up ; rise
B. up ; fall
C. down ; rise
D. down ; fall
20 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

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