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

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b LM curve

✓


c aggregate demand curve

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d IS curve

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View Answer LM curve

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


abe reduced

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bnot be affected

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cfall to zero

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dbe increase

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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

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bnot be reduced as much as it would have been

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c be replaced by foreign investment

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dbe replaced by consumer spending

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


adownward sloping over all levels of output

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b upward sloping over all levels of output

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

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dvertical until it reaches full capacity and then becomes horizontal

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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

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bincrease the money supply

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cincrease the demand for money

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ddecrease the demand for money

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The interest rate ?


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

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

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

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

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


acontractionary fiscal policy

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b expansionary monetary policy

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ccontractionary monetary policy

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d expansionary fiscal policy

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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

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

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

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

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


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

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bthe price of borrowing money

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cThe opportunity cost of holding money

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dthe return on money that is saved for the future

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The opportunity cost of holding money is determined by ?


athe discount rates

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bthe level of aggregate output

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c the interest rates

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d the inflation rates

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View Answer the interest rates

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