Question # 1

"Rising productivity does not in itself spell the end of inflation. With enough______ it would still be possible to whip prices into a froth the blank is best filled with.

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Income growth

Unemployment

Money growth

Taxes

Given fixed exchange rates assume Pakistan initiates contractionary monetary ad fiscal policies to combat inflation. these policies will also.

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Reduce a balance of payments surplus

Reduce a balance of payments deficit

Increases both imports and exports

Decrease both imports and exports

A sale of bonds by the central bank should cause.

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A fall in the interest rate

An increase in the money supply

A decrease in the reserves of the commercial banks

An increase in the commercial banks loans to the public

The IMF is an agency charged with providing.

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Technical assistance to stock market and financial market problems.

Loans for post World War II reconstruction

Short term credit for international balance of payments deficits

Bonds denominated in U.S. dollars as a loan to LDCs

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

A decline in planned investment spending unrelated to the interest rate focuses the equilibrium level of aggregate output to ________ and shifts the _ curve to the _______

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rise; Lm ; RIGHT

RISE ; is; right

fall ; IS; Left

rise ; LM; left

"Transactions" money is money used as a

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Store of value

Unit of account

Medium of exchange

Standard of deferred payment

What is the significance of underestimating transactions money.

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Monetary policy will be over simulating the economy

Monetary policy will be putting a drag on the economy

there is a need for money that the central bank should be meating.

The economy has too much money and there frore not enough spending.

Those who favor setting the target rate of inflation at about 3% believe.

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The cost of moderate inflation can be minimized by indexing the tax system and bonds

that the cost of going to 0% is very low

That moderate inflation increases money illusion

Believe that moderate inflation aggravates the time inconsistency problem

If the central bank prints more 10 billion and spends them then as a direct result of this action.

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M1 and M2 both increases

Neighed M1 nor M2 increase

M1 increase but M2 does not

M2 increased but M1 does not.

Under a fixed exchange rate system an expansionary fiscal policy leads to a

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Trade account deficit and a capital account surplus.

Trade account deficit and a capital account deficit

Trade account surplus and a capital account surplus

Trade account surplus and a capital accoundt deficit

A decrease in the quantity of money supplied shifts the money supply curve to the________ and the equilibrium interest rate

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right ; fall

right ; rises

left ; falls

left ; rises

Consider the five panels of the figure on the previous page in which panel would the simultaneous imposition of restrictive monetary policy and expansionary fiscal policy cause the largest increase in interest rates.

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Panel a

Panel b

Panel c

Panel d

There are _______ major instrument of monetary policy.

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Three

Four

Five

None

A shift in tastes loward foreign goods______ net exports and causes the quantity of aggregate output demanded to.

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decreases ; rise

decreases ; fall

increases ; rise

increases ; fall

"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

The increase in base money divided by the corresponding induced increasing commercial bank deposits is the.

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Bank's line of credit

Reserve ratio

Current ratio

Money multipiler

If young busness professionals in Pakistan suddenly decide that driving japan made cars is an important status symbol net exports will tend to _____________causing aggregate demand to.

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fall ; fall

fall ; rise

rise ; fall

rise ; rise

Which of the following causes M1 demand to decrease.

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A fall in the tax rate

An increase in income

A fall in the interest rate

An increase in the use of credit cards

A checking deposit held at a commercial bank is considered ______ of that bank.

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An asset

Net worth

a liability

Capital

Fiscal policy refers to.

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The actions of the central bank in controlling the money supply

The government's altitude to taxation

The spending and taxing policies used by the government to influence the economy

The governments regulation of financial intermediaries.

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