MCQOPTIONS
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MCQOPTIONS
This section includes 72 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. |
The curve that illustrates the positive relationship between the equilibrium values of aggregate output and the interest rate in the money market is the ? |
| A. | money supply curve |
| B. | LM curve |
| C. | money demand curve |
| D. | IS curve |
| Answer» C. money demand curve | |
| 2. |
The way in which government spending is supposed to reduce investment is by increasing ? |
| A. | incomes |
| B. | overseas investment |
| C. | imports |
| D. | interest rates |
| Answer» E. | |
| 3. |
Each point on the IS curve represents the equilibrium point in the ? |
| A. | goods market for the given interest rate |
| B. | goods market for the given level of government spending |
| C. | money market for the given level of the money supply |
| D. | money market for the given value of aggregate output |
| Answer» B. goods market for the given level of government spending | |
| 4. |
If The Central bank tries to keep the interest rate constant when the economy is operating on the steep part of the AS curve, _________ will occur? |
| A. | a hyperinflation |
| B. | a depression |
| C. | stagflation |
| D. | a recession |
| Answer» B. a depression | |
| 5. |
The idea the government spending causes a reduction in private investment is called ? |
| A. | fiscal drag |
| B. | investment blight |
| C. | crowding-out |
| D. | the Thatcher effects |
| Answer» D. the Thatcher effects | |
| 6. |
If the investment demand curve is vertical ? |
| A. | both monetary and fiscal policy are ineffective |
| B. | monetary policy is effective but fiscal policy is ineffective |
| C. | monetary policy is ineffective but fiscal policy is effective |
| D. | both monetary and fiscal policy are effective |
| Answer» D. both monetary and fiscal policy are effective | |
| 7. |
The interest rate is determined in ? |
| A. | the money and labor markets |
| B. | the goods and labor markets |
| C. | the goods market |
| D. | the money markets |
| Answer» E. | |
| 8. |
An example of an expansionary monetary policy is ? |
| A. | a reduction in the taxes banks pay on their profits. |
| B. | an increase in the required reserve ratio |
| C. | an increase in the discount rate |
| D. | the Central bank buying government securities in the open market |
| Answer» E. | |
| 9. |
The equilibrium level of aggregate output is determined in ? |
| A. | the goods and labor markets. |
| B. | the goods market |
| C. | the money markets |
| D. | the money and labor market |
| Answer» C. the money markets | |
| 10. |
The demand for money represents the idea that there is ? |
| A. | a positive relationship between the interest rate and the quantity of money demanded |
| B. | a negative relationship between the price level and the quantity of money demanded |
| C. | a negative relationship between the level of aggregate output and the quantity of money demanded |
| D. | a negative relationship between the interest rate and the quantity of money demanded |
| Answer» E. | |
| 11. |
Which one of the following is not true ? |
| 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 a |
| 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 |
| 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. |
| 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 |
| E. | If the central bank raises its refinancing rate then the commercial banks will try to reduce their lending and so reduce the need to borrow from the c |
| Answer» 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. | |
| 12. |
When interest rate rise, other things equal, we can expect the quantity of real money holding to ? |
| A. | fall |
| B. | increase |
| C. | not change |
| D. | None of these |
| Answer» B. increase | |
| 13. |
If the central bank increases the money supply at the same time as the government increasing spending, it is suggested that investment will ? |
| A. | Suffer even more |
| B. | not be reduced as much as it would have been |
| C. | be replaced by foreign investment |
| D. | be replaced by consumer spending |
| Answer» C. be replaced by foreign investment | |
| 14. |
Each point on the LM curve represents the equilibrium point in the ? |
| A. | money market for the given level of the money supply |
| B. | money market for different combinations of interest rates and output |
| C. | goods market for the given level of government spending |
| D. | goods market for the given interest rate |
| Answer» C. goods market for the given level of government spending | |
| 15. |
If there is a general shortage of liquidity in the money market then ? |
| A. | The banks will increase their lending |
| 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 expect |
| 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 ma |
| D. | the long-term interest rate in the economy will rise and the central bank will raise its interest rate in response |
| 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 expect |
| Answer» F. | |
| 16. |
Which of the following statements about money is not true ? |
| A. | A debit card is not really money because it is only a means of transferring money between accounts |
| B. | All the wealth that people hold, in whatever form, should be considered as money |
| 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 cu |
| 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 |
| Answer» 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 cu | |
| 17. |
Suppose the State Bank purchases a Rs 1,000 government bond from you. If you deposit the entire Rs 1,000 in you bank what is the total potential change in the money supply as a result of the State Bank’s action if the your bank’s reserve ratio is 20 percent ? |
| A. | Rs 4,000 |
| B. | Rs 5,000 |
| C. | Rs 1,000 |
| D. | Rs 0 |
| Answer» C. Rs 1,000 | |
| 18. |
A reduction in interest rates, causes an increases in the monetary base that results in an _________ in the availability of consumer credit and a ________ in the cost of consumer credit? |
| A. | reduction, increase |
| B. | reduction, reduction |
| C. | increase, reduction |
| D. | increase , increase |
| Answer» D. increase , increase | |
| 19. |
The chain of events that results from an expansionary monetary policy is ? |
| A. | aggregate output increases the demand for money increase the interest rate increase planned investment |
| B. | money supply increases the interest rate decrease planned investment increases aggregate output increases and money demand increase |
| C. | money supply increases the interest rate increase planned investment increases aggregate output increases and money demand increases |
| D. | money demand increases the interest rate decreases planned investment increases aggregate output increases and money demand increases |
| Answer» C. money supply increases the interest rate increase planned investment increases aggregate output increases and money demand increases | |
| 20. |
Central banks prefer to fix the ____ and accept the resulting _____? |
| A. | demand for money, interest rate |
| B. | interest rate equilibrium money supply |
| C. | demand for money equilibrium money supply |
| D. | interest rate, demand for money |
| Answer» C. demand for money equilibrium money supply | |
| 21. |
If the central bank buys financial securities in the open market to increase the monetary base, this is and example of ? |
| A. | lender of less resort |
| B. | financial intermediation |
| C. | Open Market operations |
| D. | Financial regulation |
| Answer» D. Financial regulation | |
| 22. |
M4 is a __________ measure of money and includes deposits at both __________ and _________? |
| A. | narrow, banks, building societies |
| B. | wide, banks insurance companies |
| C. | Narrow, banks insurance companies |
| D. | Wide, banks building societies |
| Answer» E. | |
| 23. |
If the keep some money available in case I see a bargain this is an example of ? |
| A. | asset demand for money |
| B. | transactions demand for money |
| C. | token demand for money |
| D. | precautionary demand for money |
| Answer» E. | |
| 24. |
An increase in the money supply aimed at increasing aggregate output is referred to as ? |
| A. | contractionary fiscal policy |
| B. | expansionary monetary policy |
| C. | contractionary monetary policy |
| D. | expansionary fiscal policy |
| Answer» C. contractionary monetary policy | |
| 25. |
If banks and the private sector decide to hold less cash the money multiplier will be ? |
| A. | Unchanged |
| B. | Larger |
| C. | Smaller |
| D. | Unstable |
| Answer» C. Smaller | |
| 26. |
Banks create money by ? |
| A. | printing it |
| B. | issuing debit cards |
| C. | accepting cheques |
| D. | lending out part of their deposits |
| Answer» E. | |
| 27. |
The interest rate ? |
| A. | is determined in the goods market and influences the level of planned investment and thus the money market |
| B. | is determined in the money market and influences the level of planned investment and thus the goods market |
| C. | is determined in the goods market and has no influences on the money market |
| D. | is determined in the money market and has no influence on the goods market |
| Answer» C. is determined in the goods market and has no influences on the money market | |
| 28. |
According to the simple Keynesian view the aggregate supply curve is ? |
| A. | downward sloping over all levels of output |
| B. | upward sloping over all levels of output |
| C. | horizontal until it reaches full capacity and then becomes vertical |
| D. | vertical until it reaches full capacity and then becomes horizontal |
| Answer» D. vertical until it reaches full capacity and then becomes horizontal | |
| 29. |
For the Central bank to keep the interest rat unchanged as the government increase spending, the Central Bank must continue to ? |
| A. | decrease the money supply |
| B. | increase the money supply |
| C. | increase the demand for money |
| D. | decrease the demand for money |
| Answer» C. increase the demand for money | |
| 30. |
Commodity money ? |
| A. | has no intrinsic value |
| B. | has intrinsic value |
| C. | is used exclusively in the economies of western Europe and north America |
| D. | is used as reserves to back fiat money |
| Answer» C. is used exclusively in the economies of western Europe and north America | |
| 31. |
In terms of the demand for money the interest rate represents ? |
| A. | the rate at which current consumption can be exchanged for future consumption |
| B. | the price of borrowing money |
| C. | The opportunity cost of holding money |
| D. | the return on money that is saved for the future |
| Answer» D. the return on money that is saved for the future | |
| 32. |
Which of the following events will lead to an increase in the demand for money ? |
| A. | An increase in the interest rate |
| B. | An increase in the level of aggregate output |
| C. | A decrease in the price level |
| D. | An increase in the supply of money |
| Answer» C. A decrease in the price level | |
| 33. |
The opportunity cost of holding money is determined by ? |
| A. | the discount rates |
| B. | the level of aggregate output |
| C. | the interest rates |
| D. | the inflation rates |
| Answer» D. the inflation rates | |
| 34. |
The main reason that people hold money to buy things is referred to as the ? |
| A. | Profit motive |
| B. | Precautionary motive |
| C. | Transactions motive |
| D. | speculation motive |
| Answer» D. speculation motive | |
| 35. |
If the quantity of money demanded exceeds the quantity of money supplied then the interest rate will ? |
| A. | change in a certain direction |
| B. | remain constant |
| C. | fall |
| D. | rise |
| Answer» E. | |
| 36. |
The primary function of bank is to ? |
| A. | Control the money supply |
| B. | Provide notes and coins for trade |
| C. | Make a profit |
| D. | Provide a cheque clearing system |
| Answer» D. Provide a cheque clearing system | |
| 37. |
A bank has excess reserves to lend but is unable to find anyone to borrow the money This will _________ the size of the money multiplier? |
| A. | reduce |
| B. | have no effect on |
| C. | increase |
| D. | double |
| Answer» B. have no effect on | |
| 38. |
The difference between a bank’s actual reserves and its required reserves is its? |
| A. | required reserve ratio |
| B. | profit margin |
| C. | excess reserves |
| D. | net worth |
| Answer» D. net worth | |
| 39. |
A checking deposit in a bank in considered _________ of that bank? |
| A. | an asset |
| B. | capital |
| C. | net worth |
| D. | a liability |
| Answer» E. | |
| 40. |
Money that a government has required has required to be accepted in settlement of debts is ? |
| A. | barter money |
| B. | currency value |
| C. | legal tender |
| D. | commodity money |
| Answer» D. commodity money | |
| 41. |
Which of the following policy actions by a central bank is likely to increase the money supply ? |
| A. | Increasing the refinancing rate |
| B. | All of these will increase the money supply |
| C. | Buying government bonds in open market operations |
| D. | Increasing reserve requirements |
| Answer» D. Increasing reserve requirements | |
| 42. |
Suppose the central bank purchases a government bond from a person who deposits the entire amount received from the sale in her bank the money supply will ? |
| A. | rise by an amount that depends on the bank’s reserve ratio |
| B. | rise by less than the amount of the deposit |
| C. | fall by exactly the amount of the deposit as long as the bank does not change its reserve ratio |
| D. | fall by exactly the amount of the deposit as long as the bank does not change its reserve ratio |
| E. | be unchanged |
| Answer» B. rise by less than the amount of the deposit | |
| 43. |
Suppose all banks maintain a 100 percent reserve ratio. If an individual deposits Rs 1,000 of currency in a bank ? |
| A. | the money supply increases by more than Rs 1,000 |
| B. | the money supply increase by less than Rs 1,000 |
| C. | the money supply decrease by less than Rs 1,000 |
| D. | the money supply decrease by more than Rs 1,000 |
| E. | The money supply is unaffected |
| Answer» F. | |
| 44. |
The three main tools of monetary policy are ? |
| A. | fiat, commodity and deposit money |
| B. | Open-market operations reserve requirements and the refinancing rate |
| C. | The money supply, government purchases and taxation |
| D. | Government expenditures taxation and reserve requirements |
| E. | Coin, currency and demand deposits |
| Answer» C. The money supply, government purchases and taxation | |
| 45. |
Bance Solida has, in the past, always operated with a reserve ratio of 25 percent. It has now been taken over by Gung-Ho Bank Which operates with a reserve ration of 12½ percent, Assuming that Banca Solida adopts the business practices of its new owner, What will be the effect on money supply in the country in which Banca Solida operates ? |
| A. | Money supply will increase because Banca Solida will increase its loans |
| B. | The effect on money supply cannot be determined from the information given |
| C. | Money supply will decrease because the loans will have to be repaid |
| D. | Money supply will be unchanged because the central bank has made no policy changes |
| Answer» B. The effect on money supply cannot be determined from the information given | |
| 46. |
Suppose Imtiaz moves his Rs1,000 demand deposit from Bank A to Bank B. If both banks operate with a reserve ratio of 10 percent What is the potential change in money supply as a result of Gerard’s action ? |
| A. | Rs 10,00 |
| B. | Rs 1,000 |
| C. | Rs 9,000 |
| D. | Rs 0 |
| Answer» E. | |
| 47. |
A fall in investment demand can result from ? |
| A. | higher interest rates |
| B. | lower expected future profits |
| C. | more expensive capital goods |
| D. | All of the above |
| Answer» E. | |
| 48. |
Which of the following is not a function of money ? |
| A. | hedge against inflation |
| B. | Medium of exchange |
| C. | unit of account |
| D. | Store of value |
| Answer» B. Medium of exchange | |
| 49. |
Three variables affect the demand for money they are _______ and __________? |
| A. | bank opening hours, the proportion of weekly paid employee’s interest rates |
| B. | the price level interest rates real income |
| C. | The time of year bank opening hours the price level |
| D. | The proportion of weekly paid employees the time of year real income |
| Answer» C. The time of year bank opening hours the price level | |
| 50. |
One of the transmission mechanisms of monetary policy is through consumer demand when interest rates ________ household wealth ________ and consumption _________? |
| A. | rise; increase, increase |
| B. | rise, falls, increase |
| C. | rise, increase, falls |
| D. | rise, falls, falls |
| Answer» E. | |