PPSC Economics Full Book MCQ Test With Answers

PPSC Economics Full Book MCQ Test

Sr. # Questions Answers Choice
1 The limit of an economy's total productive capacity at any given time is set by The amount of money in circulation Business demand for goods and services The level of government spending and taxation the quantity and quality of its productive resources
2 A sale of bonds by the central bank should cause. 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
3 The near term effect of an unexpected sale of bonds by the central bank is. An increase in interest rates, a risen investment and a rise in GDP An increase in interest rates a drop in investment and a drop in GDP A decrease in interest rtes a rise in investment and a rise in GDP A decrease in interesr rates a drop in investment and a drop in GDP
4 Which of the following causes M1 demand to decrease. A fall in the tax rate An increase in income A fall in the interest rate An increase in the use of credit cards
5 Which of the following causes M1 demand is decrease. A fall in the tax rate An increase in income A fall in the interest rate An increase in the use of credit cards
6 What major advantage of monetary policy over fiscal policy does this clipping underline. Monetary policy is more effective Monetary policy is lss discriminatory Monetary policy can influence interest rates Monetary policy can be undertaken more quickly
7 "Some economists criticized the central bank for not moving in the face of the waning recovery One who prefers anonymity stated the failure to move today leaves us with low inflation a weak economy and climbing jobless claims these are classic signs of an impending downturn The fed fiddles while the economy burns This economist would want to see. A higher interests rate A higher reserve requirement a decrease in the money supply An increase in the money supply
8 "Rising productivity does not in itself spell the end of inflation. With enough______ it would still be possible to whip prices into a froth the blank is best filled with. Income growth Unemployment Money growth Taxes
9 If firms paying employees monthly began paying them weakly then the demand for money would. Rise and income would rise Rise and income would fall Fall and income would rise Fall and income would fall
10 Suppose velocity is constant and the real income elasticity of the demand for money is less than one then estimating inflation as money growth rate minus real growth rate. Overestimates inflation Underestimates inflation Is an erratic estimate of inflation Remain an accurate estimate of inflation.
11 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. 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
12 Believers in the monetarist rule assert that Lags are long and variable the economy cna be stabilized by automatic mechanisms The central bank should keep the money supply growth constant All of the above
13 The aggregate demand curve is downward sloping because a higher price level. Makes people wealthier and so they spend more Causes higher wages and so people spend more Cuts the real value of income and so people spend less Decreases the real supply of money decreasing spending.
14 Knowledge of the money supply can lead to good predications of nominal GDP only If the price level is stable If the money supply is stable Over very short periods of time If the determinants of velocity are known
15 A major advantage of monetary over fiscal policy is that monetary policty. 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.
16 The central bank and the government are working against each other if as the government cuts taxes the central bank Sells government bonds Lowers the discount rate Increase the money supply Decrease the legal reserve requirements
17 " 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. The government may tax less The debt may become excessive The government may spend more The money supply may increase excessively
18 "A monetary rule need not mean a single baid number If the central bank fears velocity shifts rules could be adopted for adjusting the target in the face of a trends change in velocity "If velocity were trending upward the target money growth rate would be adjusted. Upward Down ward To be zero To match inflation
19 "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. Weaken fiscal policy Avoid monetary policy errors Strengthen the impact of monetary policy Ensure the independence of the central bank
20 "Far better for central bankers to get out of the fine tuning business instead they should d try to keep. Taxes low Budgets balanced Money growth low Government spending in check
21 "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. Lower interest rates Lower money supply Lower unemployment Higher inflation
22 The money multiple tells us teh ultimate increase in. The income level due to an increase in the money base The money supply due to an increase in the money base. The money supply due to an increase in the income level The income level due to an increase in the money supply
23 A state of government bonds by the central bank should cause Bond prices to rise an increase in the supply of money An increase in chartered banks loans A decrease in reserves of the banking system.
24 If the central bank prints more 10 billion and spends them then as a direct result of this action. M1 and M2 both increases Neighed M1 nor M2 increase M1 increase but M2 does not M2 increased but M1 does not.
25 The quantity of money demanded varies. Directly with both prices and output Inversely with both prices and output Directly with prices and inversely with output Inversely with prices and directly with output
26 The quantity of money demanded varies Directly with both prices and output Inversely with both prices and output Directly with prices and inversely with output Inversely with prices and directly with output
27 You move some of your savings account balance into your checking account. M2 falls and M1 rises M1 falls and M2 rises M1 and M2 are unchanged M1 rises and M2 remains unchanged
28 Money and income are. Mirror image of each other Two quite different concepts Both measured as a per annum flow Two ways of looking at the same thing.
29 "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. By buying bonds By selling bonds By changing reserve requirements All of the above
30 "The impact on this monetary aggregate of extensive finance innovation -the changes in the kinds of deposits and services offered by banks led the central bank to drop M1 as a n intermediate target with the changes in the way the public was holding payments balances the M1 aggregate no longer that the same reliable link to. Tax rates The money supply Aggregate demand Government spending
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