Question # 1

A decline in the money supply shifts the LM curve to the left causing the interest rate to ________ and output to___

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rise ; rise

rise ; fall

fall ; rise

fall ; fall

An increase in expected inflation is likely ot cause.

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A decline in the demand for real balances

an increase in the demand for real balances.

No change i the demand for real balances

No change in the demand for real balances only of the income elasticity of real money demand is zero.

As a result of the increase in government expenditures disposable income increases by.

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Rs.10 billion

Rs.9 billion

Rs.20 billion

Rs.5 billion

A decrease iin money demand other thing equal shifts the _____ curve to the

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IS ; right

Is ; Left

LM ; Left

LM ; Rfight

Over time the wealth of society increases and payments technologies get more efficient What is the effect on money demand of these two changes.

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Money demand rises proportionately to the rise in wealth.

Money demand rises, but less than proportionately to the rise in wealth.

The overall effect in ambiguous

Money demand declines

Tax incidence is the

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Ultimate distribution of a tax's burden

Measure of the inpat the tax has on employment and output

Behavior of shifting the tax to another party

Structure of the tax

An autonomous rise in __________ note causes by a change in the price level aggregate output of the interest shifts the _________ curve to the

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Net exports LM right

Net exports LM left

Money demand IS right

Money demand LM left

In the Keynesian cross diagram an increasing investment spending because companies become more optimistic about investment profitability causes the aggregate demand function to shift ______ and the equilibrium level of aggregate output to rise and the IS curve to shift to the

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up ; right

up ; left

down ;left

down ; right

The rate of which central bank lends to commercial banks is known as

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reserve rate

Discount rate

Open market operation

None

A decline in taxes __ consumer expenditure and shifts the _ curve shifts to the.

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Raises ; LM; Right

Lowers; IS ; left

raises ; IS; right

Lower ; LM; left

During the early years of the Great depression there was a significant decrees n the the money supply that causes. the ______ to shift____

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IS ; Leftward

IS ; rightwards

LM ; Leftward

LM ; rightward

Money is

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An indicator of the scarcity of wants

Anything that sellers accept i exchange for goods and services.

A form of barter

Anything that the government classifies as a trade commodity.

To move from point E to point E1 is consistent with.

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Expectations of a constant price level

Adaptive expectations that have no adjustment for the period immediately following a change in the actual price

Rational expectations and NCM

A and B

If the Bank of Pakistan wished to pursue an expansionary monetary policy it would.

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Increase the minimum reserve asset ratio

Sell government securities on the open market

Buy government securities on the open market

Raise interest rates.

An example of discretionary fiscal policy would be.

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The operation of the welfare sate

The operation of the processive federal income tax

A tax cut adopted to stimulate consumption

An interest rate out in plummeted to stimulate consumption

"The problem with monetarism is that its advocates have seen it as infallible over short periods of time and wish it to be rigid in its application over all periods of time "The advocates of monetarism wish it to the rigid in its application over all periods of time to.

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Weaken fiscal policy

Avoid monetary policy errors

Strengthen the impact of monetary policy

Ensure the independence of the central bank

If the Federal reserve conducts open market __ the money supply __ shifting LM curve to the left.

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Purchases ; decreases

sales ; decreases

purchases ; increases

sales ; increases

The Central Bank controls money and credit with the exception of.

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Controlling the money base through open market operations

Controlling reserve requirements

Setting the discount rate of interest

controlling the stock market

When your grandmother keeps her savings hidden under her mattress she is using money as.

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a standard of deferred panyment

A comfortable thing for sleeping

A medium of exchange

A store of value

Which of the followig does not shift the IS curve .

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An increases in autonomous consumption

An increase in government spending.

A decline in government spending

A fall in theinterest rate

In the 1930s, when Keynes was alive a expansionary fiscal policy taking everything else constant would have led to.

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A relative large increase in Y, a smaller increate n P

A relative large increase in P, a smaller increase in Y

Both Y and P increasing with an percentage

Only Y increase

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