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.


bbuy government securities on the open market


craise interest rates


d sell government securities on the open market



By financial crowding out economist mean ?


acredit rationing


bgovernment borrowing drives up interest rates


cBank of England controls on commercial bank lending


dwhat the government borrows cannot be used for private investment



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


aMargaret Thatcher


bRonald Reagan


cMilton Friedman


dJohn Maynard Keynes


View Answer Milton Friedman

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


aMoney multiplier


bliquidity ratio


cbank’s line of credit


drequired reserve ratio


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


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


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


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



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


adelays in the response of the economy is stabilization policy


bthe foreign response to price changes


c the change in exports and imports prices


d the change in exchange rates



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


b the Laffer curves


c bracket creep


dfiscal drag


View Answer the Laffer curves

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


aincrease: increase


bdecrease; decrease


c increase; decrease


ddecrease; increase


View Answer increase; decrease

Fiscal Policy refers to ?


aThe government regulation of financial intermediaries


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


cThe actions of the central bank in controlling the money supply


dThe government’s attitude to taxation



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


bthe currencies of relatively high-inflation countries to depreciate


cthe currencies of relatively high inflation countries to appreciate


d the currencies of relatively low inflation countries to depreciate



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