Question # 1

using money as a medium of exchange.

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Requires people to math goods wanted with goods available.

Reduces the range of feasible exchanges in the economy

Inhibits economic transactions

Reduces the need for barter in the economy.

The central bank and the government are working against each other if as the government cuts taxes the central bank

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Sells government bonds

Lowers the discount rate

Increase the money supply

Decrease the legal reserve requirements

Suppose you are a monetarist and believe in the the monetarist rule which the monetary authorities appear to be following if the economy beings to experience a slight increase in the inflation rte you would recommend that the monetary autorities.

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Increase the money growth rate slightly

Decrease the money growth rate slightly

Leave the money supply growth unchanged

Enact a one time slight decrease in the money supply

The limit of an economy's total productive capacity at any given time is set by

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The amount of money in circulation

Business demand for goods and services

The level of government spending and taxation

the quantity and quality of its productive resources

Per Capita income is obtained by dividing National income by

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Total labor Force in the country

Unemployed Youth in the country

Total population of that country

None

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

A decrease in autonomous consumer expenditure causes the equilibrium level of aggregate output to __________ at any given interest rate and shifts the ___ curve to the __________

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rise ; LM ;right

rise ; IS ; right

Fall ; LM ; left

rise ;IS; Left

If a perfectly competitive industry is in long run equilibrium all firms will

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Have a marginal costs

Have identical supply curves

Operate at the point where marginal cost just covers all variable costs

Have equal fixed costs

In the Keynesian cross diagram a decrease in investment spending because companies become more pessimistic about investment profitability causes the aggregate demand function to shift ______ and the equilibrium level of aggregate output to ______

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up ; rise

up ; fall

down ;rise

down ; fall

Factors that cause the IS curve to shift include.

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Changes in autonomous consumer spending

Changes in government spending

Changes in investment spending related to business confidence

All of the above

An increases in the value of the Rupee makes foreign goods cheaper relative to Pakistan goods, resulting in a _______ in net exports and a __ shift of the IS curve

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fall ; leftward

rise ; leftward

fall ; rightward

rise ; rightward

Commercial banks

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Are financial intermediaries that offer demand deposits.

Are owned by the Federal Reserve

Are non profit banking institutions

Are overseen by the Federal savings and loan insurance corporation.

Increasing the government budget deficit.

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Increases output in the long run

Decreases output in the short run

Decreases output in the long run.

Decreases the interest rate in the medium run.

The near term effect of an unexpected sale of bonds by the central bank is.

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An increase in interest rates, a risen investment and a rise in GDP

An increase in interest rates a drop in investment and a drop in GDP

A decrease in interest rtes a rise in investment and a rise in GDP

A decrease in interesr rates a drop in investment and a drop in GDP

A major advantage of monetary over fiscal policy is that monetary policty.

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Can be put into effect more quickly

Affects all sectors of the economy equally

Authorities are quicker to see the need for policy

Has a more direct and predictable impact on spending.

Money or paper currency serves at least _______ functions.

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Three

Four

Five

Seven

A monetary action consistent with the central bank selling bonds in the open market would be.

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An increase in the reserve ratio

A reduction in the discount rate of interest

An increase in government spending.

a reduction in excise taxes

A state of government bonds by the central bank should cause

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Bond prices to rise

an increase in the supply of money

An increase in chartered banks loans

A decrease in reserves of the banking system.

Fiscal policy refers to the manipulation of government income and expenditure to.

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control the volume and price of money

Limit the rate of increaes in incomes

Effect the value of the dollar on world financial market.

Affect the level of total expenditure output and employment

Which policies are expenditure changing policies.

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Currency devaluation and revaluation

Import quotas and tariffs

Monetary and fiscal policy

Wage and price controls

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

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