Economics MCQs

Page No. 247

When money demand is expressed in a graph with the interest rate on the vertical axis and the quantity of money on the horizontal axis an increase in the interest rate ?


aNone of these answers

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bdecrease the quantity demanded of money

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cincrease the quantity demanded of money

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ddecreases the demand for money

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Which of the following best describes how an increase in the money supply shift the aggregate demand curve ?


aThe money supply shifts right prices fall spending increases and the aggregate demand curve shifts right

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bThe money supply shifts right the interest rate rises investment decreases and the aggregate demand curve shifts left

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cThe money supply shifts right the interest rate falls, investment increases, and the aggregate demand curve shifts right

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dThe money supply shifts right, prices rise, demand curve shifts left

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Which of the following statements about stabilization policy is not true ?


aMany economists prefer automatic stabilizers because they affect the economy with a shorter lag than activist stabilization policy

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bNone of these answers are true

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cLong lags enhance the ability of policy makers to fine tune the economy

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dWhen policy makers implement activist stabilization policies there is a significant risk that their policies may actually have a destabilizing effect

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When an increase in government purchases increases the income of some people, and those people spend some of that increase in income on additional consumer goods, we have seen a demonstration of ?


aThe multiplier effects

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bsupply side economics

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cNone of these answers

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d The crowding out effect

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Which of the following statements regarding taxes is correct ?


aMost economists believe that in the short run the greatest impact of a change in taxes is on aggregate supply, not aggregate demand

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bAn increase in taxes shifts the aggregate demand curve to the right

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c A decrease in taxes shifts the aggregate supply curve to the left

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dA permanent change in taxes has a greater effect on aggregate demand than a temporary change in taxes.

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Suppose a wave of investor and consumer optimisms has increased spending so that the current level of input exceeds the long-run natural rate If policy makers choose to engage in activist stabilization policy they should ?


adecrease government spending Which the shifts the aggregate demand curve to the left

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bdecrease taxes, which shifts the aggregate demand curve to the right

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c decrease taxes, which shifts the aggregate demand curve to the left

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d decrease government spending which shifts the aggregate demand curve to the right

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If the marginal propensity of consume MPC is 0.75 the value of the multiplier is ?


a 4

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b7.5

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c5

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d0.75

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View Answer 4

Suppose a wave of investor and consumer pessimism in the USA causes a reduction in spending If the US federal Reserve (Which has a broader remit than the Bank of England Which is charged only with controlling inflation) chooses to engage in activist stabilization policy it should ?


a Increase government spending and decrease taxes

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bdecrease the money supply

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cdecrease government spending and increase taxes

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ddecrease interest rates

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In the market for real output, the initial effect of an increase in the money supply is to ?


a shift the aggregate supply curve to the right

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bshift the aggregate supply curve to the left

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c shift the aggregate demand curve to the left

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d shift the aggregate demand curve to the right

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When supply and demand for money are expressed in a graph with the interest rate on the vertical axis and the quantity of money on the horizontal axis an increase in the price level ?


a shifts money demand to the right and increases the interest rate

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bNone of these answers

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cshifts money demand to the right and decreases the interest rate

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d shifts money demand to the left and increases the interest rate

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