Question # 1

Fiscal policy is purposeful movements in _____designed to direct an economy

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Interest rate

Legal structures

Government regulations

D Government spending and taxes

A decrease 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

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

"The problem with monetarism is that its advocates have seen it as infallible over short periods of time and wish it to be rigid in its application over all periods of time "The advocates of monetarism wish it to the rigid in its application over all periods of time to.

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Weaken fiscal policy

Avoid monetary policy errors

Strengthen the impact of monetary policy

Ensure the independence of the central bank

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.

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Fiscal drag

The Laffer curve

Bracket creep

Debt burden

Under system fixed exchange rates which of the following policies promotes internal balance for a nation.

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Fiscal policy

Monetary policy

Both fiscal policy and monetary policy

Neither fiscal policy nor monetary policy

A bonds becomes a riskier asset the demand for money_______ and all else constant, the equilibrium interest rate

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Rises ; rises

rises ; falls

falls ; rises

falls ; falls

How much of the Rs.5 billion dollar increase in government expenditures will be recouped in taxes.

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Rs.1 billion

Rs.2 billion

Rs.0.9 billion

Rs.0.5 billion

A decrease in the legal reserve ratio from 25% to 20% will

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Result in light money

Be contractionary

Increases excess reserves and the potential money multiplier

Decrease excess reserves and the potential money multiplier

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

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An increase in the reserve ratio

A reduction in the discount rate of interest

An increase in government spending.

a reduction in excise taxes

A shift in tastes toward Pakistan goods ______ net exports and causes the quantity of aggregate output demanded to______

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decreases ; rise

decreases ; fall

Increases ; rise

Increase ; fall

Money and income are.

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Mirror image of each other

Two quite different concepts

Both measured as a per annum flow

Two ways of looking at the same thing.

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

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right ; fall

right ; rises

left ; falls

left ; rises

The opportunity cost of holding currency decreases when.

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Income decreases

The interest rate on bonds decrease

Buying newly issued government bonds directly from the central bank

Buying newly issued government bonds directly to the central bank.

One of money's primary roles in the economy comes from the use of money to transfer purchasing power to the future This role of money is called.

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store of value

Unit of account

Medium of exchange

Standard of deferred payment

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

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IS ; right

IS ; Left

LM ; Left

LM ; right

In an economy experience high interest rates and high unemployment The ISLM frame work predicts that _________ policy has been too.

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fiscal ; expansionary

fiscal ; contractionary

monetary ; expansionary

monetary ; contractionary

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

A bank has excess liquidity reserves to lend but is unable to find a willing borrower these will_______ the size of the money multiplier.

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Reduce

Increase

Have no effect on

Double

What's the most common way for a central bank to reduce the money supply.

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Collect higher taxes

Sell bonds to the public

Buy bounds from the government

Buy bonds from the public

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

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