MCQOPTIONS

Explore topic-wise MCQs in Economics Mcqs.

This section includes 18 Mcqs, each offering curated multiple-choice questions to sharpen your Economics Mcqs knowledge and support exam preparation. Choose a topic below to get started.

1.	For the Eurozone countries, the most important source of the downward slope of the aggregate demand curve is probably ?
A.	The wealth effect
B.	None of these answers
C.	The exchange-rate effect
D.	The fiscal effect
E.	The interest-rate effect
Answer» F.

2.	Which of the following best describes how an increase in the money supply shift the aggregate demand curve ?
A.	The money supply shifts right prices fall spending increases and the aggregate demand curve shifts right
B.	The money supply shifts right the interest rate rises investment decreases and the aggregate demand curve shifts left
C.	The money supply shifts right the interest rate falls, investment increases, and the aggregate demand curve shifts right
D.	The money supply shifts right, prices rise, demand curve shifts left
Answer» D. The money supply shifts right, prices rise, demand curve shifts left

3.	When an increase in government purchases raises incomes shifts money demand to the right raises the interest rate, and lowers investment we have seen a demonstration of ?
A.	supply-side economics
B.	None of these answers
C.	The crowding-out effect
D.	The multiplier effects
Answer» D. The multiplier effects

4.	The initial effect of an increase in the money supply is to ?
A.	increase the interest rate
B.	increase the price level
C.	decrease the price level
D.	decrease the interest rate
Answer» C. decrease the price level

5.	Which of the following is an automatic stabilizer ?
A.	Spending on public schools
B.	Military spending
C.	All of these answers are automatic stabilizers
D.	spending on the space shuttle
E.	Unemployment benefits
Answer» F.

6.	The initial impact of an increase in government spending is to shift ?
A.	aggregate demand to the right
B.	aggregate demand to the left
C.	aggregate supply to the right
D.	aggregate supply to the left
Answer» B. aggregate demand to the left

7.	Suppose the government increases its purchases by Rs16 billion. If the multiplier effect exceeds the crowding out effect, then ?
A.	The aggregate supply curve shifts to the right by more than Rs 16 billion
B.	The aggregate demand curve shifts to the left by more than Rs 16 billion
C.	The aggregate demand curve shifts to the right by more than Rs 16 billion
D.	the aggregate supply curve shifts to the left by more than Rs 16 billion
Answer» D. the aggregate supply curve shifts to the left by more than Rs 16 billion

8.	An increase in the marginal propensity to consumer (MPC) ?
A.	raises the value of the multiplier
B.	has no impact on the value of the multiplier?
C.	rarely occurs because the MPC is set by congressional legislation
D.	lowers the value of the multiplier
Answer» B. has no impact on the value of the multiplier?

9.	When money demand is expressed in a graph with the interest rate on the vertical axis and the quantity of money on the horizontal axis an increase in the interest rate ?
A.	None of these answers
B.	decrease the quantity demanded of money
C.	increase the quantity demanded of money
D.	decreases the demand for money
E.	increases the demand for money
Answer» C. increase the quantity demanded of money

10.	Which of the following statements about stabilization policy is not true ?
A.	Many economists prefer automatic stabilizers because they affect the economy with a shorter lag than activist stabilization policy
B.	None of these answers are true
C.	Long lags enhance the ability of policy makers to fine tune the economy
D.	When policy makers implement activist stabilization policies there is a significant risk that their policies may actually have a destabilizing effect
Answer» D. When policy makers implement activist stabilization policies there is a significant risk that their policies may actually have a destabilizing effect

11.	Which of the following statements regarding taxes is correct ?
A.	Most economists believe that in the short run the greatest impact of a change in taxes is on aggregate supply, not aggregate demand
B.	An increase in taxes shifts the aggregate demand curve to the right
C.	A decrease in taxes shifts the aggregate supply curve to the left
D.	A permanent change in taxes has a greater effect on aggregate demand than a temporary change in taxes.
Answer» E.

12.	When an increase in government purchases increases the income of some people, and those people spend some of that increase in income on additional consumer goods, we have seen a demonstration of ?
A.	The multiplier effects
B.	supply side economics
C.	None of these answers
D.	The crowding out effect
Answer» B. supply side economics

13.	In the market for real output, the initial effect of an increase in the money supply is to ?
A.	shift the aggregate supply curve to the right
B.	shift the aggregate supply curve to the left
C.	shift the aggregate demand curve to the left
D.	shift the aggregate demand curve to the right
Answer» E.

14.	If the marginal propensity of consume MPC is 0.75 the value of the multiplier is ?
A.	4
B.	7.5
C.	5
D.	0.75
Answer» B. 7.5

15.	Suppose a wave of investor and consumer pessimism in the USA causes a reduction in spending If the US federal Reserve (Which has a broader remit than the Bank of England Which is charged only with controlling inflation) chooses to engage in activist stabilization policy it should ?
A.	Increase government spending and decrease taxes
B.	decrease the money supply
C.	decrease government spending and increase taxes
D.	decrease interest rates
Answer» E.

16.	Suppose a wave of investor and consumer optimisms has increased spending so that the current level of input exceeds the long-run natural rate If policy makers choose to engage in activist stabilization policy they should ?
A.	decrease government spending Which the shifts the aggregate demand curve to the left
B.	decrease taxes, which shifts the aggregate demand curve to the right
C.	decrease taxes, which shifts the aggregate demand curve to the left
D.	decrease government spending which shifts the aggregate demand curve to the right
Answer» B. decrease taxes, which shifts the aggregate demand curve to the right

17.	Keynes liquidity preference theory of the interest rate suggests that the interest rate is determined by ?
A.	aggregate supply and aggregate demand
B.	the supply and demand for loanable funds
C.	the supply and demand for money
D.	the supply and demand for labor
Answer» D. the supply and demand for labor

18.	When supply and demand for money are expressed in a graph with the interest rate on the vertical axis and the quantity of money on the horizontal axis an increase in the price level ?
A.	shifts money demand to the right and increases the interest rate
B.	None of these answers
C.	shifts money demand to the right and decreases the interest rate
D.	shifts money demand to the left and increases the interest rate
E.	shifts money demand to the left and decrease the interest rate
Answer» B. None of these answers