Economics MCQs

Page No. 289

An example of an expansionary monetary policy is ?


aa reduction in the taxes banks pay on their profits.


ban increase in the required reserve ratio


can increase in the discount rate


dthe Central bank buying government securities in the open market



The interest rate is determined in ?


athe money and labor markets


b the goods and labor markets


cthe goods market


dthe money markets


View Answer the money markets

The equilibrium level of aggregate output is determined in ?


athe goods and labor markets.


bthe goods market


c the money markets


d the money and labor market


View Answer the goods market

The demand for money represents the idea that there is ?


aa positive relationship between the interest rate and the quantity of money demanded


ba negative relationship between the price level and the quantity of money demanded


ca negative relationship between the level of aggregate output and the quantity of money demanded


da negative relationship between the interest rate and the quantity of money demanded



The motive for holding money that encourages investors to hold bonds when interest rates are low, with the hope of selling them when interest rates are high, is the ?


aTransactions motive


b precautionary motive


cprofit motive


dspeculation motive


View Answer speculation motive

Which of the following events will lead to a decrease in the equilibrium interest rate ?


aA sale of government securities by the central bank


bAn increase in the level of aggregate output


cAn increase in the discount rate


dA decrease in the price level



When economies speak of the demand for money which of the following are they asking ?


a How much cash do you wish you could have?


bHow much wealth would you like?


cHow much income would you like to earn?


dWhat proportion of your financial assets do you want to hold in non-interest-bearing forms



Assume that commercial banks are holding excess reserves because business firms and consumers are not willing to borrow money A decrease in the discount rate is likely to ?


aincrease the money supply because it is now cheaper for banks to borrow from the central bank


b decrease the money supply because it will now be more expensive for business firms and consumers to borrow money


c Not change the money supply because banks already have excess reserves they cannot lend


d Decrease the money supply because it is now cheaper for banks to borrow from the central bank instead instead of buying government securities



Which of the following activities is one of the responsibilities of the Bank of England to the banking system ?


a Assisting Banks that are in a difficult financial position


bAuditing the various agencies and department of the government


cLoaning money to other countries that are friendly to the UK.


d Issuing new bonds to finance the PSBR.



Which of the following is included in broad money, but not included in narrow money ?


a savings accounts


b Travelers checks


cCurrency held outside banks


dAutomatic-transfer savings accounts


View Answer savings accounts

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