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

Under a fixed exchange rate system an expansionary fiscal policy leads to a

Question # 2

Which of the following events will lead to a decrease in the demand for money.

Question # 3

If the Central Bank wanted to decrease the quantity of money held by the public it would.

Question # 4

An increase in government spending causes the equilibrium level of aggregate output to_______ at any given interest rate and shifts the ____ curve to the

Question # 5

Factor that cause the IS curve to shift include.

Question # 6

In the case of an expansionary ___ policy the interest rate rise while in the case of an expansionary _______ policy the interest rate falls.

Question # 7

During the early years of the Great depression there was a significant decrees n the the money supply that causes. the ______ to shift____

Question # 8

Other things equal a decrease in autonomous consumption shifts the _____ curve to the

Question # 9

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

Question # 10

using money as a medium of exchange.

Question # 11

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

Question # 12

Knowledge of the money supply can lead to good predications of nominal GDP only

Question # 13

An increase in autonomous consumer expenditure causes the equilibrium levelof aggregate output to _______ at any given interest rate and shifts the ____ curve to the

Question # 14

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

Question # 15

Given fixed exchange rates assume Pakistan initiates contractionary monetary ad fiscal policies to combat inflation. these policies will also.

Question # 16

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

Question # 17

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 # 18

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

Question # 19

A shift in tastes toward Pakistan goods ________ net exports and causes the IS curve to shift to the.

Question # 20

The money multiple tells us teh ultimate increase in.

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Sr.# Question Answer
1 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 _______
A. rise ; left
B. rise ; right
C. fall ; left
D. fall ; right
2 "Although he didn't say so, this may ultimately compet the central bank to resort increasingly to managing the money supply by managing banks excess cash reserves the stuff from which the banks create loans". How would the central bank manages these excess reserves.
A. By buying bonds
B. By selling bonds
C. By changing reserve requirements
D. All of the above
3 "Transactions" money is money used as a
A. Store of value
B. Unit of account
C. Medium of exchange
D. Standard of deferred payment
4 If the original money supply is MSo and the original demand for money is MDo then
A. The equilibrium interest rate and savings are 5% and 50
B. The money supply is 200 and equilibrium income is 500
C. The equilibrium interest rate and income are 5% and 600
D. The speculative demand is 25
5 During periods of negative demand shocks deficit target reductions such as those mandated in the Gramm Rudman Hollings Act would tend to.
A. Stimulate the economy and increase empolyment.
B. Result in additional recessionary declines in employment and income
C. Stimulator defiance spending
D. Have an automatic stabilizing impact upon the economy
6 An increase in autonomous consumer expenditure causes the equilibrium levelof 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
7 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
8 An increase in the quantity of money supplied shifts the money supply curve to the_______ and the equilibrium interest rate
A. right ; falls
B. right ; rises
C. left ; falls
D. left ; rises
9 Which of the following events will lead to a decrease in the demand for money.
A. An increase in the level of aggregate output.
B. A decrease in the supply of money
C. A decrease in the interest rate
D. a decrease in the price level
10 "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
11 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
12 What's the most common way for a central bank to reduce the money supply.
A. Collect higher taxes
B. Sell bonds to the public
C. Buy bounds from the government
D. Buy bonds from the public
13 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
14 Which of the following causes M1 demand is 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
15 The negative effect on the economy that occurs when average tax rates increases because taxpayers have moved into higher income brackets during an expansion is.
A. Fiscal drag
B. The Laffer curve
C. Bracket creep
D. Debt burden
16 How do the banks gain from this corporate behavior.
A. More loans can be made
B. Tax free profits can be made
C. Interest rates can be increased
D. By circumvent banking regulations
17 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
18 A checking deposit held at a commercial bank is considered ______ of that bank.
A. An asset
B. Net worth
C. a liability
D. Capital
19 Which of the following measures is the best measure of money as a medium of exchange.
A. M1
B. M2
C. M3
D. None of the above
20 The central bank and the government are working against each other if as the government cuts taxes the central bank
A. Sells government bonds
B. Lowers the discount rate
C. Increase the money supply
D. Decrease the legal reserve requirements

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