Money, Interest Rates And Output MCQs

Option A: reduction, increase

Option B: reduction, reduction

Option C: increase, reduction

Option D: increase , increase

Correct Answer: increase, reduction ✔

Option A: demand for money, interest rate

Option B: interest rate equilibrium money supply

Option C: demand for money equilibrium money supply

Option D: interest rate, demand for money

Correct Answer: interest rate equilibrium money supply ✔

Option A: lender of less resort

Option B: financial intermediation

Option C: Open Market operations

Option D: Financial regulation

Correct Answer: Open Market operations ✔

Option A: narrow, banks, building societies

Option B: wide, banks insurance companies

Option C: Narrow, banks insurance companies

Option D: Wide, banks building societies

Correct Answer: Wide, banks building societies ✔

Option A: fall

Option B: increase

Option C: not change

Option D: None of these

Correct Answer: fall ✔

Option A: asset demand for money

Option B: transactions demand for money

Option C: token demand for money

Option D: precautionary demand for money

Correct Answer: precautionary demand for money ✔

Option A: Unchanged

Option B: Larger

Option C: Smaller

Option D: Unstable

Correct Answer: Larger ✔

Option A: printing it

Option B: issuing debit cards

Option C: accepting cheques

Option D: lending out part of their deposits

Correct Answer: lending out part of their deposits ✔

Option A: IOU , inflation hedge store of value

Option B: Medium of exchange inflation hedge store of value

Option C: Medium of exchange unit of account IOU

Option D: Medium of exchange unit of account store of value

Correct Answer: Medium of exchange unit of account store of value ✔

Option A: money market for the given level of the money supply

Option B: money market for different combinations of interest rates and output

Option C: goods market for the given level of government spending

Option D: goods market for the given interest rate

Correct Answer: money market for different combinations of interest rates and output ✔

Option A: money supply curve

Option B: LM curve

Option C: money demand curve

Option D: IS curve

Correct Answer: LM curve ✔

Option A: goods market for the given interest rate

Option B: goods market for the given level of government spending

Option C: money market for the given level of the money supply

Option D: money market for the given value of aggregate output

Correct Answer: goods market for the given interest rate ✔

Option A: incomes

Option B: overseas investment

Option C: imports

Option D: interest rates

Correct Answer: interest rates ✔

Option A: fiscal drag

Option B: investment blight

Option C: crowding-out

Option D: the Thatcher effects

Correct Answer: crowding-out ✔

Option A: a hyperinflation

Option B: a depression

Option C: stagflation

Option D: a recession

Correct Answer: a hyperinflation ✔

Option A: both monetary and fiscal policy are ineffective

Option B: monetary policy is effective but fiscal policy is ineffective

Option C: monetary policy is ineffective but fiscal policy is effective

Option D: both monetary and fiscal policy are effective

Correct Answer: monetary policy is ineffective but fiscal policy is effective ✔

Option A: a reduction in the taxes banks pay on their profits.

Option B: an increase in the required reserve ratio

Option C: an increase in the discount rate

Option D: the Central bank buying government securities in the open market

Correct Answer: the Central bank buying government securities in the open market ✔

Option A: the money and labor markets

Option B: the goods and labor markets

Option C: the goods market

Option D: the money markets

Correct Answer: the money markets ✔

Option A: the goods and labor markets.

Option B: the goods market

Option C: the money markets

Option D: the money and labor market

Correct Answer: the goods market ✔

Option A: a positive relationship between the interest rate and the quantity of money demanded

Option B: a negative relationship between the price level and the quantity of money demanded

Option C: a negative relationship between the level of aggregate output and the quantity of money demanded

Option D: a negative relationship between the interest rate and the quantity of money demanded

Correct Answer: a negative relationship between the interest rate and the quantity of money demanded ✔

Option A: Transactions motive

Option B: precautionary motive

Option C: profit motive

Option D: speculation motive

Correct Answer: speculation motive ✔

Option A: A sale of government securities by the central bank

Option B: An increase in the level of aggregate output

Option C: An increase in the discount rate

Option D: A decrease in the price level

Correct Answer: A decrease in the price level ✔

Option A: How much cash do you wish you could have?

Option B: How much wealth would you like?

Option C: How much income would you like to earn?

Option D: What proportion of your financial assets do you want to hold in non-interest-bearing forms

Correct Answer: What proportion of your financial assets do you want to hold in non-interest-bearing forms ✔

Option A: increase the money supply because it is now cheaper for banks to borrow from the central bank

Option B: decrease the money supply because it will now be more expensive for business firms and consumers to borrow money

Option C: Not change the money supply because banks already have excess reserves they cannot lend

Option D: Decrease the money supply because it is now cheaper for banks to borrow from the central bank instead instead of buying government securities

Correct Answer: Not change the money supply because banks already have excess reserves they cannot lend ✔

Option A: decreases

Option B: remain the same, as long as banks hold no excess reserves

Option C: could either increase or decrease

Option D: increases

Correct Answer: increases ✔

Option A: Assisting Banks that are in a difficult financial position

Option B: Auditing the various agencies and department of the government

Option C: Loaning money to other countries that are friendly to the UK.

Option D: Issuing new bonds to finance the PSBR.

Correct Answer: Assisting Banks that are in a difficult financial position ✔

Option A: savings accounts

Option B: Travelers checks

Option C: Currency held outside banks

Option D: Automatic-transfer savings accounts

Correct Answer: savings accounts ✔

Option A: precious metals

Option B: commodity money

Option C: fiat money

Option D: barter items

Correct Answer: fiat money ✔

Option A: bills of exchanges

Option B: government bonds

Option C: Treasury bills

Option D: Capital bills

Correct Answer: government bonds ✔

Option A: The banks will increase their lending

Option B: The short-term interest rate at which the economy’s commercial banks lend to and borrow from each other will fall and the central bank may be expected to reduce the supply of liquidity to the banks

Option C: The short-term interest rate at which the economy’s commercial banks lend to and borrow from each other will rise and the long-term interest rate may be expected to rise as a result

Option D: the long-term interest rate in the economy will rise and the central bank will raise its interest rate in response

Correct Answer: E. The short-term interest rate at which the economy’s commercial banks lend to and borrow from each other will rise and the central bank may be expected to increase the supply of liquidity to the banks. ✔

Option A: fiat, commodity and deposit money

Option B: Open-market operations reserve requirements and the refinancing rate

Option C: The money supply, government purchases and taxation

Option D: Government expenditures taxation and reserve requirements

Correct Answer: Open-market operations reserve requirements and the refinancing rate ✔

Option A: Rs 4,000

Option B: Rs 5,000

Option C: Rs 1,000

Option D: Rs 0

Correct Answer: Rs 5,000 ✔

Option A: Increasing the refinancing rate

Option B: All of these will increase the money supply

Option C: Buying government bonds in open market operations

Option D: Increasing reserve requirements

Correct Answer: Buying government bonds in open market operations ✔

Option A: Rs 10,00

Option B: Rs 1,000

Option C: Rs 9,000

Option D: Rs 0

Correct Answer: Rs 0 ✔

Option A: Money supply will increase because Banca Solida will increase its loans

Option B: The effect on money supply cannot be determined from the information given

Option C: Money supply will decrease because the loans will have to be repaid

Option D: Money supply will be unchanged because the central bank has made no policy changes

Correct Answer: Money supply will increase because Banca Solida will increase its loans ✔

Option A: has no intrinsic value

Option B: has intrinsic value

Option C: is used exclusively in the economies of western Europe and north America

Option D: is used as reserves to back fiat money

Correct Answer: has intrinsic value ✔

Option A: hedge against inflation

Option B: Medium of exchange

Option C: unit of account

Option D: Store of value

Correct Answer: hedge against inflation ✔

Option A: higher interest rates

Option B: lower expected future profits

Option C: more expensive capital goods

Option D: All of the above

Correct Answer: All of the above ✔

Option A: rise; increase, increase

Option B: rise, falls, increase

Option C: rise, increase, falls

Option D: rise, falls, falls

Correct Answer: rise, falls, falls ✔

Option A: a change in the real money supply

Option B: a change in real income

Option C: a change in competition in the banking industry

Option D: any of the above

Correct Answer: any of the above ✔

Option A: bank deposits, building society deposits

Option B: Currency in circulation, banks cash reserves

Option C: retail sight deposits building society deposits

Option D: retail deposits, wholesale deposits

Correct Answer: Currency in circulation, banks cash reserves ✔

Option A: fall

Option B: not change

Option C: increase

Option D: None of these

Correct Answer: increase ✔

Option A: bank opening hours, the proportion of weekly paid employee’s interest rates

Option B: the price level interest rates real income

Option C: The time of year bank opening hours the price level

Option D: The proportion of weekly paid employees the time of year real income

Correct Answer: the price level interest rates real income ✔

Option A: State Bank of Pakistan Issue Department

Option B: Money + bank cards + credit cards

Option C: Cheques + money + bank cards + credit cards

Option D: Currency in circulation plus bank deposits

Correct Answer: Currency in circulation plus bank deposits ✔

Option A: Control the money supply

Option B: Provide notes and coins for trade

Option C: Make a profit

Option D: Provide a cheque clearing system

Correct Answer: Make a profit ✔

Option A: flat; steep

Option B: flat; flat

Option C: steep; flat

Option D: steep; steep

Correct Answer: flat; steep ✔

Option A: the economy moves up the LM curve

Option B: The LM curves shifts to the left

Option C: The economy moves down the LM curve

Option D: The LM curve shift to the right

Correct Answer: The LM curve shift to the right ✔

Option A: aggregate supply curve

Option B: LM curve

Option C: aggregate demand curve

Option D: IS curve

Correct Answer: LM curve ✔

Option A: be reduced

Option B: not be affected

Option C: fall to zero

Option D: be increased

Correct Answer: be increased ✔

Option A: Suffer even more

Option B: not be reduced as much as it would have been

Option C: be replaced by foreign investment

Option D: be replaced by consumer spending

Correct Answer: not be reduced as much as it would have been ✔

Option A: downward sloping over all levels of output

Option B: upward sloping over all levels of output

Option C: horizontal until it reaches full capacity and then becomes vertical

Option D: vertical until it reaches full capacity and then becomes horizontal

Correct Answer: horizontal until it reaches full capacity and then becomes vertical ✔

Option A: decrease the money supply

Option B: increase the money supply

Option C: increase the demand for money

Option D: decrease the demand for money

Correct Answer: increase the money supply ✔

Option A: is determined in the goods market and influences the level of planned investment and thus the money market

Option B: is determined in the money market and influences the level of planned investment and thus the goods market

Option C: is determined in the goods market and has no influences on the money market

Option D: is determined in the money market and has no influence on the goods market

Correct Answer: is determined in the money market and influences the level of planned investment and thus the goods market ✔

Option A: contractionary fiscal policy

Option B: expansionary monetary policy

Option C: contractionary monetary policy

Option D: expansionary fiscal policy

Correct Answer: expansionary monetary policy ✔

Option A: aggregate output increases the demand for money increase the interest rate increase planned investment

Option B: money supply increases the interest rate decrease planned investment increases aggregate output increases and money demand increase

Option C: money supply increases the interest rate increase planned investment increases aggregate output increases and money demand increases

Option D: money demand increases the interest rate decreases planned investment increases aggregate output increases and money demand increases

Correct Answer: money supply increases the interest rate decrease planned investment increases aggregate output increases and money demand increase ✔

Option A: the rate at which current consumption can be exchanged for future consumption

Option B: the price of borrowing money

Option C: The opportunity cost of holding money

Option D: the return on money that is saved for the future

Correct Answer: The opportunity cost of holding money ✔

Option A: the discount rates

Option B: the level of aggregate output

Option C: the interest rates

Option D: the inflation rates

Correct Answer: the interest rates ✔

Option A: Profit motive

Option B: Precautionary motive

Option C: Transactions motive

Option D: speculation motive

Correct Answer: Transactions motive ✔

Option A: An increase in the interest rate

Option B: An increase in the level of aggregate output

Option C: A decrease in the price level

Option D: An increase in the supply of money

Correct Answer: An increase in the level of aggregate output ✔

Option A: change in a certain direction

Option B: remain constant

Option C: fall

Option D: rise

Correct Answer: rise ✔

Option A: reduce

Option B: have no effect on

Option C: increase

Option D: double

Correct Answer: reduce ✔

Option A: required reserve ratio

Option B: profit margin

Option C: excess reserves

Option D: net worth

Correct Answer: excess reserves ✔

Option A: an asset

Option B: capital

Option C: net worth

Option D: a liability

Correct Answer: a liability ✔

Option A: barter money

Option B: currency value

Option C: legal tender

Option D: commodity money

Correct Answer: legal tender ✔

Option A: The difference between the price at which commercial bank sells an asset to the central bank and the price it agrees to buy it back can be expressed as an annualized percentage of the selling price and this is called the refinancing rate

Option B: Commercial banks may borrow from and lend to each other and the interest rate at which they do this is called the refinancing rate

Option C: In the UK the refinancing rate is known as the repo rate and in the USA it is referred to as the discount rate.

Option D: If the central bank has bought some assets from a commercial bank with an agreement that the commercial bank will buy them back at a later date, then this would be called a repo

Correct Answer: Commercial banks may borrow from and lend to each other and the interest rate at which they do this is called the refinancing rate ✔

Option A: rise by an amount that depends on the bank’s reserve ratio

Option B: rise by less than the amount of the deposit

Option C: fall by exactly the amount of the deposit as long as the bank does not change its reserve ratio

Option D: fall by exactly the amount of the deposit as long as the bank does not change its reserve ratio

Correct Answer: A. rise by an amount that depends on the bank’s reserve ratio ✔

Option A: the money supply increases by more than Rs 1,000

Option B: the money supply increase by less than Rs 1,000

Option C: the money supply decrease by less than Rs 1,000

Option D: the money supply decrease by more than Rs 1,000

Correct Answer: The money supply is unaffected ✔

Option A: The interest rate at Which commercial banks lend to and borrow from each other

Option B: The interest rate the European Central Bank pays on reserves

Option C: The interest rates the public pays when borrowing from banks

Option D: The interest rates the European Central Bank charges on loans to banks

Correct Answer: The interest rates the European Central Bank charges on loans to banks ✔

Option A: assets

Option B: deposits

Option C: loans

Option D: government bonds

Correct Answer: deposits ✔

Option A: 4

Option B: 20

Option C: 25

Option D: 5

Correct Answer: 5 ✔

Option A: A debit card is not really money because it is only a means of transferring money between accounts

Option B: All the wealth that people hold, in whatever form, should be considered as money

Option C: Wealth held in the current account you hold with your bank is almost as convenient for buying things as wealth held in your wallet so the wealth in current accounts should be included in measures of money

Option D: In a complex economy it is not easy to draw a clear dividing line between assets that should be considered as money and those that should not

Correct Answer: All the wealth that people hold, in whatever form, should be considered as money ✔

Option A: Paper euros

Option B: gold

Option C: Silver coins

Option D: cigarettes

Correct Answer: Paper euros ✔

Option A: The value of all coins and currency in circulation at any time

Option B: Anything that is generally accepted as a medium of exchange

Option C: The same as income

Option D: All of the above

Correct Answer: Anything that is generally accepted as a medium of exchange ✔