Question # 1

Which of the following events will lead to a decrease in the demand for money.

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An increase in the level of aggregate output.

A decrease in the supply of money

A decrease in the interest rate

a decrease in the price level

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.

When the central Bank ________ the money supply the LM curve shifts to the _______ interest rates ____________ and equilibrium aggregate output.

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Increase ; right ; fall; increase

increases ; left ; rise ; decrease

decreases ; left ;rise ; increases

decreases ; left ; fall ; increases

An item designed as money that is intrinsically worthless could the.

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A currency note

A silver coin

A barter item

Any tradeable commodity

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

You know that all taxes are distortionary under what conditions will this knowledge lead you to appose the imposition of every single tax in the economy.

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If you live in a 1st best world.

If you live in a 2nd best world

If the tax rates on some of the items are prohibitively high

Either of the above

Believers in the monetarist rule assert that

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Lags are long and variable

the economy cna be stabilized by automatic mechanisms

The central bank should keep the money supply growth constant

All of the above

The main source of interest profits for banks is.

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Checking account fees

Loans

Government securities

Savigng accounts

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.

An increase in government spending 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 ; LM ;Left

fall ; IS ; Left

rise ; IS ;right

a contractionary monetary policy

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Reduces interest rtes

Reduces real output

shifts the LM curve to the right

All of the above

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 _____the equilibrium level of aggregate output to fall and the IS curve to shift to the.

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up ; left

up ; right

down ; left

down ; right

A shift in tastes toward Pakistan goods ______ net exports and causes the quantity of aggregate output demanded to______

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decreases ; rise

decreases ; fall

Increases ; rise

Increase ; fall

How much of the Rs. 5 billion dollar increase in the government expenditures will be financed by bond sales.

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Rs.3.5 billion

Rs.1.5 billion

Rs. 4.9 billion

Rs.2.8 billion

Time lags which often erode effectiveness of monetary and fiscal policy measures represent.

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The change in export and import price.

Delays in the response of the economy to stabilization policy.

The foreign response to price changes

The change in exchang erates

In the ISLM frame work an expansionary fiscal policy causes aggregate output to _________ and the interest rate to.

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increases ; increase

increases ; decrease

decreases ; decreases

decreases ; increses

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

The equilibrium level of income is.

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Rs. 360

Rs.600

Rs.440

Rs.500

The quantity of money demanded varies

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Directly with both prices and output

Inversely with both prices and output

Directly with prices and inversely with output

Inversely with prices and directly with output

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

According to classical models, the level of employment is determined primarily by

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The level of aggregate demand for goods and services

Prices and wages

Government taxation

Government spending

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