monetary fiscal and incomes policy and inflation Mcqs
1. Central banks in LDCs generally have less effect on expenditure and output than in LDCs because of ?
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A. the relative insensitivity of investment and employment to monetary policies

B. #NAME?

C. a poorly developed securities market

D. an externally dependent banking system

2. _______ states that as real GNP per capita rises, people demand relatively more social goods and relatively fewer private goods?
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A. incomes policy

B. Moral hazard

C. Wagners law

D. Fiscal policy

3. Which of the following are costs of inflation ?
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A. inflation distorts business behavior especially investment behavior

B. Inflation imposes a tax on the holders of money

C. inflation weakens the creation of credit and capital markets

D. #NAME?

4. Under financial repression ?
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A. #NAME?

B. banks face pressure for loans to those with political connections

C. banks depend on foreign banks to set interest rates

D. banks engage in non-price rationing of loans

5. Which of the following is NOT true ?
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A. several LDCs have used value-added taxes to raise a substantial fraction of revenues

B. import duties can restrict luxury goods consumption

C. Taxes on international trade are the major source of tax revenue for low-income countries with poor administrative capacity

D. Cascade tax a form of progressive tax, is dominant in DCs
6. By using fiscal policy, i (e) varying ______ and/or _____ governments achieve goals for output and employment growth as well as price stability?
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A. tax rates, government spending

B. interest rates, financial liberalization

C. interest rates, tax rates

D. demand pull inflation tax elasticity

7. When the financial system lacks the capability of making judgement about investment opportunities due to asymmetric information leading to potentially bad credit risks lending is subject to ?
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A. social goods

B. adverse selection

C. moral hazard

D. hyperinflation

8. The property tax wealth tax inheritance tax and income taxes such as persona and corporate taxes are ?
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A. indirect taxes

B. inelastic

C. direct taxes

D. value-added tax

9. Monetary policy effects the _________ and __________?
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A. stock price, minimum wage

B. taxes, exchange rate

C. money supply, interest rate

D. reserve, unemployment

10. With _______ prices rise in the first sector, remain the same in the second and increase overall?
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A. import substitution

B. inflationary expectations

C. ratchet inflation

D. demand pull inflation

11. Inflation is measured by the ?
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A. #NAME?

B. depreciation

C. consumer price index (CPI)

D. GDP deflator

12. fiscal incentives to attract businesses from abroad include ?
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A. lower tax rates for reinvested business profits

B. accelerated depreciation

C. #NAME?

D. tax holidays

13. If people with higher incomes pay a higher percentage of income in taxes, the income tax structure is ?
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A. value added taxes (VAT)

B. excise taxes

C. progressive

D. regressive

14. The Bank of England and the Federal Reserve ?
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A. loan money to most of LDC commercial banks

B. are central banks

C. use fiscal policy to influence GDP

D. are branches of commercial banks

15. During Stagflation ?
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A. an increase in aggregate spending will eliminate the recession

B. #NAME?

C. the central bank decease money supply to reduce inflation

D. a decrease in aggregate spending will reduce inflation

16. Demand pull inflation result from ?
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A. demand for government spending on public goods goes due to lack of financial backup through tax collection

B. a shortage of demand for goods and services in excess of supply during depression

C. consumer business and government demand for goods and services in excess of an economys capacity to produce

D. demand for public goods is greater than demand for consumer goods