Question # 1

If the Bank of Pakistan wished to pursue an expansionary monetary policy it would.

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Increase the minimum reserve asset ratio

Sell government securities on the open market

Buy government securities on the open market

Raise interest rates.

An autonomous increase in money demand.

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Shift the IS curve to the right

Shifts the IS curve to the left

Shift the LM curve to the right

Shift the LM curve to the left

During periods of negative demand shocks deficit target reductions such as those mandated in the Gramm Rudman Hollings Act would tend to.

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Stimulate the economy and increase empolyment.

Result in additional recessionary declines in employment and income

Stimulator defiance spending

Have an automatic stabilizing impact upon the economy

If the central bank prints more 10 billion and spends them then as a direct result of this action.

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M1 and M2 both increases

Neighed M1 nor M2 increase

M1 increase but M2 does not

M2 increased but M1 does not.

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

An increase in money demand other thing equal shifts the ____ curve to the___

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IS ; right

IS ; Left

LM ; Left

LM ; 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

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

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decreases ; right

decreases ; fall

increases ; rise

increases ; fall

In the 1930s, when Keynes was alive a expansionary fiscal policy taking everything else constant would have led to.

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A relative large increase in Y, a smaller increate n P

A relative large increase in P, a smaller increase in Y

Both Y and P increasing with an percentage

Only Y increase

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

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Raises ; LM; Right

Lowers; IS ; left

raises ; IS; right

Lower ; LM; left

A major advantage of monetary over fiscal policy is that monetary policty.

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Can be put into effect more quickly

Affects all sectors of the economy equally

Authorities are quicker to see the need for policy

Has a more direct and predictable impact on spending.

In economics money refers to

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Income

Wealth

Assets use and accepted an payment

Currency

Suppose you are a monetarist and believe in the the monetarist rule which the monetary authorities appear to be following if the economy beings to experience a slight increase in the inflation rte you would recommend that the monetary autorities.

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Increase the money growth rate slightly

Decrease the money growth rate slightly

Leave the money supply growth unchanged

Enact a one time slight decrease in the money supply

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

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Reduce a balance of payments surplus

Reduce a balance of payments deficit

Increases both imports and exports

Decrease both imports and exports

When there is no change in central banking holding of international reserve balances a country's

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Trae balance always equals 0

Current account balance always equals 0

Capital account balance always equals 0

Balance of payments always equal 0

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

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

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right ; left

right ; right

left ; left

left ; right

A reduction in government spending causes the equilibrium level of aggregate output to ___________ at any given interest rate and shifts the ________ curve to the.

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fall ;LM; right

fall ;IS; Left

fall ;LM; Left

rise ;LM; Rifht

Fiscal policy refers to the manipulation of government income and expenditure to.

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control the volume and price of money

Limit the rate of increaes in incomes

Effect the value of the dollar on world financial market.

Affect the level of total expenditure output and employment

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

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up ; right

up ; left

down ;left

down ; right

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