fiscal and monetary policy MCQs – Page 2

Practise focused fiscal and monetary policy questions with marked answers for exam preparation and subject revision.

fiscal and monetary policy Mcqs
21. The marginal rate of tax paid is ?
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A. The total tax paid / total income

B. Change in income / change in tax paid

C. Total income / total tax paid

D. Change in the tax paid / change in income
22. In a regressive tax system ?
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A. The amount of tax paid increase with income

B. The average rate of tax is constant as income increases

C. The marginal rate of tax decrease with more income

D. The average rate of tax falls as income increase
23. Goodharts Law suggests that ?
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A. controlling one part of the money supply will merely result in that item becoming less important

B. monetary policy can only be effective if it is a long-term policy

C. the money supply must only expand at the rate of growth of real national income

D. bad money drives out good

24. The public Sector Net Cash Requirement (PSNCR) is ?
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A. A measure of the countrys trade position

B. A measure of the countrys total debt

C. A measure of the countrys budget position

D. A measure of the governments monetary stance

25. The budget deficit tends to decrease then ?
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A. GDP decrease rapidly

B. GDP increase

C. GDP remains unchanged

D. GDP decrease slightly

26. Over-funding is when the State Bank of Pakistan ?
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A. sells more government bonds than are required to finance the PSBR

B. sells government securities on the open market

C. buys government securities on the open market

D. sells less government bonds than are required to finance the PSBR

27. As an economy grows ?
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A. This will have no effect on the governments budget position

B. The governments budget position should automatically improve

C. The governments budget position should automatically worsen

D. This will reduce the governments tax revenue

28. The parable of Riding a Switchback suggest that stabilizing policy ?
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A. is not sufficiently stimulating or contracting the economy at any time

B. is stimulating or contracting the economy at the wrong times

C. is desirable

D. is effective

29. Imagine there is no tax on income up to Rs 1000 after that there is a tax of 505 what is the average tax rate on an income of Rs 20,000 ?
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A. 20%

B. 25%

C. Rs 50000

D. Rs 10000