Economics MCQs

Page No. 292

The curve that illustrates the negative relationship between the equilibrium values of aggregate output and the interest rate in the goods market is the ?


aaggregate supply curve


b LM curve


c aggregate demand curve


d IS curve


View Answer LM curve

If planned investment becomes more sensitive to interest rate changes the crowding out effect will ?


abe reduced


bnot be affected


cfall to zero


dbe increase


View Answer be increased

If the central bank increases the money supply at the same time as the government increasing spending, it is suggested that investment will ?


asuffer even more


bnot be reduced as much as it would have been


c be replaced by foreign investment


dbe replaced by consumer spending



According to the simple Keynesian view the aggregate supply curve is ?


adownward sloping over all levels of output


b upward sloping over all levels of output


c. horizontal until it reaches full capacity and then becomes vertical


dvertical until it reaches full capacity and then becomes horizontal



For the Central bank to keep the interest rat unchanged as the government increase spending, the Central Bank must continue to ?


adecrease the money supply


bincrease the money supply


cincrease the demand for money


ddecrease the demand for money



The interest rate ?


ais determined in the goods market and influences the level of planned investment and thus the money market


b is determined in the money market and influences the level of planned investment and thus the goods market


cis determined in the goods market and has no influences on the money market


d is determined in the money market and has no influence on the goods market



An increase in the money supply aimed at increasing aggregate output is referred to as ?


acontractionary fiscal policy


b expansionary monetary policy


ccontractionary monetary policy


d expansionary fiscal policy



The chain of events that results from an expansionary monetary policy is ?


a aggregate output increases the demand for money increase the interest rate increase planned investment


bmoney supply increases the interest rate decrease planned investment increases aggregate output increases and money demand increase


c money supply increases the interest rate increase planned investment increases aggregate output increases and money demand increases


dmoney demand increases the interest rate decreases planned investment increases aggregate output increases and money demand increases



In terms of the demand for money the interest rate represents ?


a the rate at which current consumption can be exchanged for future consumption


bthe price of borrowing money


cThe opportunity cost of holding money


dthe return on money that is saved for the future



The opportunity cost of holding money is determined by ?


athe discount rates


bthe level of aggregate output


c the interest rates


d the inflation rates


View Answer the interest rates

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