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Focused topic practice

money interest rates and output MCQs

Practise focused money interest rates and output questions with marked answers for exam preparation and subject revision.

money interest rates and output Mcqs
1. For the Central bank to keep the interest rat unchanged as the government increase spending, the Central Bank must continue to ?
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A. decrease the money supply

B. decrease the demand for money

C. increase the demand for money

D. increase the money supply
2. The refinancing rate is ?
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A. The interest rate the European Central Bank pays on reserves

B. He interests rate banks pay on the publics deposits

C. The interest rates the European Central Bank charges on loans to banks

D. The interest rate at Which commercial banks lend to and borrow from each other

E. The interest rates the public pays when borrowing from banks

3. Money that a government has required has required to be accepted in settlement of debts is ?
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A. legal tender

B. commodity money

C. barter money

D. currency value

4. The interest rate is determined in ?
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A. the money markets

B. the money and labor markets

C. the goods and labor markets

D. the goods market

5. 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 Gerards action ?
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A. Rs 10,00

B. Rs 0

C. Rs 1,000

D. Rs 9,000

6. Commodity money ?
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A. is used exclusively in the economies of western Europe and north America

B. has intrinsic value

C. has no intrinsic value

D. is used as reserves to back fiat money

7. The way in which government spending is supposed to reduce investment is by increasing ?
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A. imports

B. interest rates

C. overseas investment

D. incomes

8. Which of the following is not a function of money ?
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A. unit of account

B. hedge against inflation

C. Store of value

D. Medium of exchange

9. If the investment demand curve is vertical ?
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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

10. When real income increases other things equal we can expect the demand for real money holdings to ?
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A. fall

B. not change

C. increase

D. None of these

11. Money is ?
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A. Anything that is generally accepted as a medium of exchange

B. All of the above

C. The value of all coins and currency in circulation at any time

D. The same as income

12. Each point on the IS curve represents the equilibrium point in the ?
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A. money market for the given value of aggregate output

B. goods market for the given level of government spending

C. goods market for the given interest rate

D. money market for the given level of the money supply

13. 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?
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A. increase , increase

B. reduction, reduction

C. increase, reduction

D. reduction, increase

14. Equilibrium in the Money market will change if there is ?
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A. a change in the real money supply

B. any of the above

C. a change in real income

D. a change in competition in the banking industry

15. If banks and the private sector decide to hold less cash the money multiplier will be ?
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A. Unstable

B. Smaller

C. Unchanged

D. Larger
16. An item designated as money that is intrinsically worthless is ?
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A. precious metals

B. barter items

C. commodity money

D. fiat money
17. The monetary base is ________ and _________?
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A. retail deposits, wholesale deposits

B. retail sight deposits building society deposits

C. bank deposits, building society deposits

D. Currency in circulation, banks cash reserves
18. Three variables affect the demand for money they are _______ and __________?
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A. the price level interest rates real income

B. The time of year bank opening hours the price level

C. The proportion of weekly paid employees the time of year real income

D. bank opening hours, the proportion of weekly paid employees interest rates

19. An example of fiat money is ?
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A. gold

B. Paper euros

C. Silver coins

D. cigarettes

20. In terms of the demand for money the interest rate represents ?
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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