Economics MCQs

Page No. 204

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


aincrease the minimum reserve asset ratio.

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bbuy government securities on the open market

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craise interest rates

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d sell government securities on the open market

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By financial crowding out economist mean ?


acredit rationing

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bgovernment borrowing drives up interest rates

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cBank of England controls on commercial bank lending

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dwhat the government borrows cannot be used for private investment

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The idea that the money supply should change to accommodate changes in aggregate demand is associated with the idea of ?


aMargaret Thatcher

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bRonald Reagan

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cMilton Friedman

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dJohn Maynard Keynes

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View Answer Milton Friedman

The multiple by which total deposits can increase for every pound increase in reserves is the ?


aMoney multiplier

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bliquidity ratio

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cbank’s line of credit

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drequired reserve ratio

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View Answer Money multiplier

The response lag of stabilization policy represents ?


a the time that it takes for policy makers to recognize the existence of boom of bust

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bthe time needed for parliament to agree to a tax cut.

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cthe time that is necessary to put the desired policy into effect

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dthe time that it takes for the economy to adjust to the new conditions after a new policy has been implemented

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


adelays in the response of the economy is stabilization policy

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bthe foreign response to price changes

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c the change in exports and imports prices

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d the change in exchange rates

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The negative effect on the economy that occurs when average tax rates increase because taxpayers have moved into higher income brackets during an expansion is ?


adebt burden

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b the Laffer curves

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c bracket creep

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dfiscal drag

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View Answer the Laffer curves

Automatic stabilisers act to ____ government expenditures and ____ government revenues during recessions ?


aincrease: increase

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bdecrease; decrease

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c increase; decrease

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ddecrease; increase

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View Answer increase; decrease

Fiscal Policy refers to ?


aThe government regulation of financial intermediaries

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b The spending and taxing policies used by the government to influence the economy

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cThe actions of the central bank in controlling the money supply

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dThe government’s attitude to taxation

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Under a system of floating exchange rates there is a general tendency for ?


aexchange rates to be insensitive to the differential rates of inflation between countries

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bthe currencies of relatively high-inflation countries to depreciate

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cthe currencies of relatively high inflation countries to appreciate

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d the currencies of relatively low inflation countries to depreciate

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