money interest rates and output MCQs – Page 4

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

money interest rates and output Mcqs
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
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

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.