Question # 1

A sale of bonds by the central bank should cause.

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A fall in the interest rate

An increase in the money supply

A decrease in the reserves of the commercial banks

An increase in the commercial banks loans to the public

An example of nondiscretionary fiscal policy would be.

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The operation of the welfare state

A Federal jobs program adopted to stimulate consumption

A tax cut adopted to stimulate consumption

An interest rate cut implemented to stimulate consumption

An increase in oil prices, such as the oil shocks in the 70 s, lead to _______ there by causing _____

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A movement along the AS curve cost push inflation

A leftward shift int he AS curve demand pull inflation.

A right ward shift in the AS Curve cost push inflation

a left ward shift in the AS curve cost push inflation

A shift in tastes loward foreign goods______ net exports and causes the quantity of aggregate output demanded to.

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decreases ; rise

decreases ; fall

increases ; rise

increases ; fall

An item designed as money that is intrinsically worthless could the.

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A currency note

A silver coin

A barter item

Any tradeable commodity

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

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rise,; left

rise ;right

fall ; left

fall ; right

How do the banks gain from this corporate behavior.

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More loans can be made

Tax free profits can be made

Interest rates can be increased

By circumvent banking regulations

Which policies are expenditure changing policies.

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Currency devaluation and revaluation

Import quotas and tariffs

Monetary and fiscal policy

Wage and price controls

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

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An increase in the level of aggregate output.

A decrease in the supply of money

A decrease in the interest rate

a decrease in the price level

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

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IS ; right

Is ; Left

LM ; Left

LM ; Rfight

According to the Laffer curve as tax rates increase tax revenues.

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Decrease continuously.

Initially decrease and then increase

Rise continuously

Initially increase and then decrease

Credit constitutes.

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Saving made available to borrowers

A form of liquid asset

bank loans converted into commodity money

Money used as a standard of deferred payment.

Which of the following causes M1 demand is decrease.

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A fall in the tax rate

An increase in income

A fall in the interest rate

An increase in the use of credit cards

An increases in the value of the Rupee makes foreign goods cheaper relative to Pakistan goods, resulting in a _______ in net exports and a __ shift of the IS curve

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fall ; leftward

rise ; leftward

fall ; rightward

rise ; rightward

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

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Demand ; right

demand ; left

supply ; right

supply ; left

An increase in the rate of inflation which is not accompanied by any change in the volume of consumer goods sold will automatically increase the.

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Revenue from value added tax

Level of company profits

Level of unemployment

Average level of wages

Net taxes are.

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Government expenditures minus government revenues.

Taxes paid by firms and households to the government minus the transfer payments made to firms and household.

Taxes paid by firms and household to the government plus transfer payments made to firms and hose holds.

Taxes paid by firms and hose hold to the government minus the cost of collecting the taxes.

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

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The money supply increases

The money supply decreases

The money supply is unaffected

We cannot tell what will happen to the money supply

Time lags which often erode effectiveness of monetary and fiscal policy measures represent.

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The change in export and import price.

Delays in the response of the economy to stabilization policy.

The foreign response to price changes

The change in exchang erates

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 _____the equilibrium level of aggregate output to ______l and the IS curve Curve to shift to the.

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rise ; left

rise ; right

fall ; left

fall ; right

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

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Positively ; positively

Positively ; negatively

negatively ; positively

negatively ; negatively

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