money interest rates and output Mcqs
51. The motive for holding money that encourages investors to hold bonds when interest rates are low, with the hope of selling them when interest rates are high, is the ?
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A. speculation motive

B. profit motive

C. precautionary motive

D. Transactions motive

52. When the money supply increase ?
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A. The LM curves shifts to the left

B. The LM curve shift to the right

C. The economy moves down the LM curve

D. the economy moves up the LM curve

53. The interest rate ?
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A. is determined in the money market and has no influence on the goods market

B. is determined in the goods market and influences the level of planned investment and thus the money market

C. is determined in the goods market and has no influences on the money market

D. is determined in the money market and influences the level of planned investment and thus the goods market
54. According to the simple Keynesian view the aggregate supply curve is ?
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A. vertical until it reaches full capacity and then becomes horizontal

B. downward sloping over all levels of output

C. upward sloping over all levels of output

D. horizontal until it reaches full capacity and then becomes vertical
55. The idea the government spending causes a reduction in private investment is called ?
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A. fiscal drag

B. investment blight

C. crowding-out

D. the Thatcher effects

56. Central banks prefer to fix the ____ and accept the resulting _____?
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A. demand for money, interest rate

B. interest rate, demand for money

C. interest rate equilibrium money supply

D. demand for money equilibrium money supply

57. Money has 3 main function they are __________ and __________?
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A. Medium of exchange unit of account store of value

B. Medium of exchange inflation hedge store of value

C. IOU , inflation hedge store of value

D. Medium of exchange unit of account store of value

E. Medium of exchange unit of account IOU

58. When interest rate rise, other things equal, we can expect the quantity of real money holding to ?
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A. not change

B. increase

C. fall

D. None of these

59. The money supply is ?
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A. Money + bank cards + credit cards

B. State Bank of Pakistan Issue Department

C. Cheques + money + bank cards + credit cards

D. Currency in circulation plus bank deposits
60. Keynesians and monetarists differ over how steep the IS and LM curves actually are Monetarists claim that the IS curve must be __________ and the LM curve must be __________?
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A. steep; steep

B. flat; steep

C. steep; flat

D. flat; flat

61. A fall in investment demand can result from ?
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A. lower expected future profits

B. higher interest rates

C. All of the above

D. more expensive capital goods

62. 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 12 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 ?
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A. Money supply will decrease because the loans will have to be repaid

B. Money supply will increase because Banca Solida will increase its loans

C. Money supply will be unchanged because the central bank has made no policy changes

D. The effect on money supply cannot be determined from the information given

63. The main reason that people hold money to buy things is referred to as the ?
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A. Transactions motive

B. Profit motive

C. Precautionary motive

D. speculation motive

64. Which one of the following is not true ?
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A. 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 central bank

B. In the UK the refinancing rate is known as the repo rate and in the USA it is referred to as the discount rate.

C. 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 as an annualized percentage of the selling price and this is called the refinancing 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 this would be called a repo

E. Commercial banks may borrow from and lend to each other and the interest rate at which they do this is called the refinancing rate
65. Government Securities with terms of more than one year are called ?
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A. bills of exchanges

B. Treasury bills

C. Capital bills

D. government bonds
66. If the quantity of money demanded exceeds the quantity of money supplied then the interest rate will ?
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A. remain constant

B. rise

C. change in a certain direction

D. fall

67. As the required reserve ratio is decreased the money multiplier ?
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A. could either increase or decrease

B. decreases

C. remain the same, as long as banks hold no excess reserves

D. increases
68. Suppose all banks maintain a 100 percent reserve ratio. If an individual deposits Rs 1,000 of currency in a bank ?
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A. the money supply increase by less than Rs 1,000

B. The money supply is unaffected

C. the money supply decrease by less than Rs 1,000

D. the money supply increases by more than Rs 1,000

E. the money supply decrease by more than Rs 1,000

69. If the keep some money available in case I see a bargain this is an example of ?
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A. precautionary demand for money

B. transactions demand for money

C. asset demand for money

D. token demand for money

70. 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?
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A. stagflation

B. a hyperinflation

C. a depression

D. a recession

71. An example of an expansionary monetary policy is ?
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A. an increase in the discount rate

B. an increase in the required reserve ratio

C. the Central bank buying government securities in the open market

D. a reduction in the taxes banks pay on their profits.

72. A checking deposit in a bank in considered _________ of that bank?
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A. capital

B. a liability

C. net worth

D. an asset

73. If the banks in an economy operate with a reserve ratio of 20 percent then the money multiplier is ?
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A. 20

B. 5

C. 4

D. 25