money interest rates and output MCQs – Page 3

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

money interest rates and output Mcqs

41. Reserve requirements that may be imposed on an economys banks by its central bank specify that banks by its central bank specify that banks reserve must be a minimum percentage of them ?
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A. assets

B. loans

C. deposits

D. government bonds

42. Which of the following is included in broad money, but not included in narrow money ?
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A. Automatic-transfer savings accounts

B. savings accounts

C. Travelers checks

D. Currency held outside banks

43. Assume that commercial banks are holding excess reserves because business firms and consumers are not willing to borrow money A decrease in the discount rate is likely to ?
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A. Not change the money supply because banks already have excess reserves they cannot lend

B. Decrease the money supply because it is now cheaper for banks to borrow from the central bank instead instead of buying government securities

C. decrease the money supply because it will now be more expensive for business firms and consumers to borrow money

D. increase the money supply because it is now cheaper for banks to borrow from the central bank

44. The equilibrium level of aggregate output is determined in ?
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A. the goods and labor markets.

B. the money markets

C. the goods market

D. the money and labor market

45. M4 is a __________ measure of money and includes deposits at both __________ and _________?
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A. narrow, banks, building societies

B. wide, banks insurance companies

C. Narrow, banks insurance companies

D. Wide, banks building societies

46. Which of the following events will lead to a decrease in the equilibrium interest rate ?
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A. A decrease in the price level

B. An increase in the level of aggregate output

C. A sale of government securities by the central bank

D. An increase in the discount rate

47. The curve that illustrates the positive relationship between the equilibrium values of aggregate output and the interest rate in the money market is the ?
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A. money supply curve

B. LM curve

C. money demand curve

D. IS curve

48. 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 Banks action if the your banks reserve ratio is 20 percent ?
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A. Rs 1,000

B. Rs 0

C. Rs 4,000

D. Rs 5,000

49. The difference between a banks actual reserves and its required reserves is its?
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A. required reserve ratio

B. excess reserves

C. profit margin

D. net worth

50. 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?
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A. have no effect on

B. increase

C. double

D. reduce

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

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