MCQOPTIONS
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MCQOPTIONS
This section includes 67 Mcqs, each offering curated multiple-choice questions to sharpen your Economics knowledge and support exam preparation. Choose a topic below to get started.
| 1. |
Which of the following statements about money is not true ? |
| A. | A debit card is not really money because it is only a means of transferring money between accounts |
| B. | All the wealth that people hold, in whatever form, should be considered as money |
| C. | Wealth held in the current account you hold with your bank is almost as convenient for buying things as wealth held in your wallet so the wealth in cu |
| D. | In a complex economy it is not easy to draw a clear dividing line between assets that should be considered as money and those that should not |
| Answer» C. Wealth held in the current account you hold with your bank is almost as convenient for buying things as wealth held in your wallet so the wealth in cu | |
| 2. |
Which of the following policy actions by a central bank is likely to increase the money supply ? |
| A. | Increasing the refinancing rate |
| B. | All of these will increase the money supply |
| C. | Buying government bonds in open market operations |
| D. | Increasing reserve requirements |
| Answer» D. Increasing reserve requirements | |
| 3. |
Which of the following is not a function of money ? |
| A. | hedge against inflation |
| B. | Medium of exchange |
| C. | unit of account |
| D. | Store of value |
| Answer» B. Medium of exchange | |
| 4. |
Which of the following is included in broad money, but not included in narrow money ? |
| A. | savings accounts |
| B. | Travelers checks |
| C. | Currency held outside banks |
| D. | Automatic-transfer savings accounts |
| Answer» B. Travelers checks | |
| 5. |
Which of the following events will lead to a decrease in the equilibrium interest rate ? |
| A. | A sale of government securities by the central bank |
| B. | An increase in the level of aggregate output |
| C. | An increase in the discount rate |
| D. | A decrease in the price level |
| Answer» E. | |
| 6. |
Which of the following events will lead to an increase in the demand for money ? |
| A. | An increase in the interest rate |
| B. | An increase in the level of aggregate output |
| C. | A decrease in the price level |
| D. | An increase in the supply of money |
| Answer» C. A decrease in the price level | |
| 7. |
Which of the following activities is one of the responsibilities of the Bank of England to the banking system ? |
| A. | Assisting Banks that are in a difficult financial position |
| B. | Auditing the various agencies and department of the government |
| C. | Loaning money to other countries that are friendly to the UK. |
| D. | Issuing new bonds to finance the PSBR. |
| Answer» B. Auditing the various agencies and department of the government | |
| 8. |
When the money supply increase ? |
| A. | the economy moves up the LM curve |
| B. | The LM curves shifts to the left |
| C. | The economy moves down the LM curve |
| D. | The LM curve shift to the right |
| Answer» E. | |
| 9. |
When real income increases other things equal we can expect the demand for real money holdings to ? |
| A. | fall |
| B. | not change |
| C. | increase |
| D. | None of these |
| Answer» D. None of these | |
| 10. |
When interest rate rise, other things equal, we can expect the quantity of real money holding to ? |
| A. | fall |
| B. | increase |
| C. | not change |
| D. | None of these |
| Answer» B. increase | |
| 11. |
When economies speak of the demand for money which of the following are they asking ? |
| A. | How much cash do you wish you could have? |
| B. | How much wealth would you like? |
| C. | How much income would you like to earn? |
| D. | What proportion of your financial assets do you want to hold in non-interest-bearing forms |
| Answer» E. | |
| 12. |
Three variables affect the demand for money they are _______ and __________? |
| A. | bank opening hours, the proportion of weekly paid employee’s interest rates |
| B. | the price level interest rates real income |
| C. | The time of year bank opening hours the price level |
| D. | The proportion of weekly paid employees the time of year real income |
| Answer» C. The time of year bank opening hours the price level | |
| 13. |
The way in which government spending is supposed to reduce investment is by increasing ? |
| A. | incomes |
| B. | overseas investment |
| C. | imports |
| D. | interest rates |
| Answer» E. | |
| 14. |
The three main tools of monetary policy are ? |
| A. | fiat, commodity and deposit money |
| B. | Open-market operations reserve requirements and the refinancing rate |
| C. | The money supply, government purchases and taxation |
| D. | Government expenditures taxation and reserve requirements |
| E. | Coin, currency and demand deposits |
| Answer» C. The money supply, government purchases and taxation | |
| 15. |
The refinancing rate is ? |
| A. | The interest rate at Which commercial banks lend to and borrow from each other |
| B. | The interest rate the European Central Bank pays on reserves |
| C. | The interest rates the public pays when borrowing from banks |
| D. | The interest rates the European Central Bank charges on loans to banks |
| E. | He interests rate banks pay on the public’s deposits |
| Answer» E. He interests rate banks pay on the public’s deposits | |
| 16. |
The primary function of bank is to ? |
| A. | Control the money supply |
| B. | Provide notes and coins for trade |
| C. | Make a profit |
| D. | Provide a cheque clearing system |
| Answer» D. Provide a cheque clearing system | |
| 17. |
The opportunity cost of holding money is determined by ? |
| A. | the discount rates |
| B. | the level of aggregate output |
| C. | the interest rates |
| D. | the inflation rates |
| Answer» D. the inflation rates | |
| 18. |
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 ? |
| A. | Transactions motive |
| B. | precautionary motive |
| C. | profit motive |
| D. | speculation motive |
| Answer» E. | |
| 19. |
The money supply is ? |
| A. | State Bank of Pakistan Issue Department |
| B. | Money + bank cards + credit cards |
| C. | Cheques + money + bank cards + credit cards |
| D. | Currency in circulation plus bank deposits |
| Answer» E. | |
| 20. |
The monetary base is ________ and _________? |
| A. | bank deposits, building society deposits |
| B. | Currency in circulation, banks cash reserves |
| C. | retail sight deposits building society deposits |
| D. | retail deposits, wholesale deposits |
| Answer» C. retail sight deposits building society deposits | |
| 21. |
The main reason that people hold money to buy things is referred to as the ? |
| A. | Profit motive |
| B. | Precautionary motive |
| C. | Transactions motive |
| D. | speculation motive |
| Answer» D. speculation motive | |
| 22. |
The interest rate ? |
| A. | is determined in the goods market and influences the level of planned investment and thus the money market |
| B. | is determined in the money market and influences the level of planned investment and thus the goods market |
| C. | is determined in the goods market and has no influences on the money market |
| D. | is determined in the money market and has no influence on the goods market |
| Answer» C. is determined in the goods market and has no influences on the money market | |
| 23. |
The interest rate is determined in ? |
| A. | the money and labor markets |
| B. | the goods and labor markets |
| C. | the goods market |
| D. | the money markets |
| Answer» E. | |
| 24. |
The idea the government spending causes a reduction in private investment is called ? |
| A. | fiscal drag |
| B. | investment blight |
| C. | crowding-out |
| D. | the Thatcher effects |
| Answer» D. the Thatcher effects | |
| 25. |
The equilibrium level of aggregate output is determined in ? |
| A. | the goods and labor markets. |
| B. | the goods market |
| C. | the money markets |
| D. | the money and labor market |
| Answer» C. the money markets | |
| 26. |
The difference between a bank’s actual reserves and its required reserves is its? |
| A. | required reserve ratio |
| B. | profit margin |
| C. | excess reserves |
| D. | net worth |
| Answer» D. net worth | |
| 27. |
The demand for money represents the idea that there is ? |
| A. | a positive relationship between the interest rate and the quantity of money demanded |
| B. | a negative relationship between the price level and the quantity of money demanded |
| C. | a negative relationship between the level of aggregate output and the quantity of money demanded |
| D. | a negative relationship between the interest rate and the quantity of money demanded |
| Answer» E. | |
| 28. |
The curve that illustrates the positive relationship between the equilibrium values of aggregate output and the interest rate in the money market is the ? |
| A. | money supply curve |
| B. | LM curve |
| C. | money demand curve |
| D. | IS curve |
| Answer» C. money demand curve | |
| 29. |
The curve that illustrates the negative relationship between the equilibrium values of aggregate output and the interest rate in the goods market is the ? |
| A. | aggregate supply curve |
| B. | LM curve |
| C. | aggregate demand curve |
| D. | IS curve |
| Answer» C. aggregate demand curve | |
| 30. |
The chain of events that results from an expansionary monetary policy is ? |
| A. | aggregate output increases the demand for money increase the interest rate increase planned investment |
| B. | money supply increases the interest rate decrease planned investment increases aggregate output increases and money demand increase |
| C. | money supply increases the interest rate increase planned investment increases aggregate output increases and money demand increases |
| D. | money demand increases the interest rate decreases planned investment increases aggregate output increases and money demand increases |
| Answer» C. money supply increases the interest rate increase planned investment increases aggregate output increases and money demand increases | |
| 31. |
Reserve requirements that may be imposed on an economy’s banks by its central bank specify that banks by its central bank specify that banks reserve must be a minimum percentage of them ? |
| A. | assets |
| B. | deposits |
| C. | loans |
| D. | government bonds |
| Answer» C. loans | |
| 32. |
One of the transmission mechanisms of monetary policy is through consumer demand when interest rates ________ household wealth ________ and consumption _________? |
| A. | rise; increase, increase |
| B. | rise, falls, increase |
| C. | rise, increase, falls |
| D. | rise, falls, falls |
| Answer» E. | |
| 33. |
Money that a government has required has required to be accepted in settlement of debts is ? |
| A. | barter money |
| B. | currency value |
| C. | legal tender |
| D. | commodity money |
| Answer» D. commodity money | |
| 34. |
Money is ? |
| A. | The value of all coins and currency in circulation at any time |
| B. | Anything that is generally accepted as a medium of exchange |
| C. | The same as income |
| D. | All of the above |
| Answer» C. The same as income | |
| 35. |
Money has 3 main function they are __________ and __________? |
| A. | IOU , inflation hedge store of value |
| B. | Medium of exchange inflation hedge store of value |
| C. | Medium of exchange unit of account IOU |
| D. | Medium of exchange unit of account store of value |
| E. | Medium of exchange unit of account store of value |
| Answer» F. | |
| 36. |
M4 is a __________ measure of money and includes deposits at both __________ and _________? |
| A. | narrow, banks, building societies |
| B. | wide, banks insurance companies |
| C. | Narrow, banks insurance companies |
| D. | Wide, banks building societies |
| Answer» E. | |
| 37. |
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 __________? |
| A. | flat; steep |
| B. | flat; flat |
| C. | steep; flat |
| D. | steep; steep |
| Answer» B. flat; flat | |
| 38. |
In terms of the demand for money the interest rate represents ? |
| 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 |
| Answer» D. the return on money that is saved for the future | |
| 39. |
If there is a general shortage of liquidity in the money market then ? |
| A. | The banks will increase their lending |
| B. | The short-term interest rate at which the economy’s commercial banks lend to and borrow from each other will fall and the central bank may be expect |
| C. | The short-term interest rate at which the economy’s commercial banks lend to and borrow from each other will rise and the long-term interest rate ma |
| D. | the long-term interest rate in the economy will rise and the central bank will raise its interest rate in response |
| E. | The short-term interest rate at which the economy’s commercial banks lend to and borrow from each other will rise and the central bank may be expect |
| Answer» F. | |
| 40. |
If the quantity of money demanded exceeds the quantity of money supplied then the interest rate will ? |
| A. | change in a certain direction |
| B. | remain constant |
| C. | fall |
| D. | rise |
| Answer» E. | |
| 41. |
If the keep some money available in case I see a bargain this is an example of ? |
| A. | asset demand for money |
| B. | transactions demand for money |
| C. | token demand for money |
| D. | precautionary demand for money |
| Answer» E. | |
| 42. |
If the investment demand curve is vertical ? |
| 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 |
| Answer» D. both monetary and fiscal policy are effective | |
| 43. |
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? |
| A. | a hyperinflation |
| B. | a depression |
| C. | stagflation |
| D. | a recession |
| Answer» B. a depression | |
| 44. |
If the central bank increases the money supply at the same time as the government increasing spending, it is suggested that investment will ? |
| A. | Suffer even more |
| B. | not be reduced as much as it would have been |
| C. | be replaced by foreign investment |
| D. | be replaced by consumer spending |
| Answer» C. be replaced by foreign investment | |
| 45. |
If the central bank buys financial securities in the open market to increase the monetary base, this is and example of ? |
| A. | lender of less resort |
| B. | financial intermediation |
| C. | Open Market operations |
| D. | Financial regulation |
| Answer» D. Financial regulation | |
| 46. |
If the banks in an economy operate with a reserve ratio of 20 percent then the money multiplier is ? |
| A. | 4 |
| B. | 20 |
| C. | 25 |
| D. | 5 |
| Answer» E. | |
| 47. |
If planned investment becomes more sensitive to interest rate changes the crowding out effect will ? |
| A. | be reduced |
| B. | not be affected |
| C. | fall to zero |
| D. | be increased |
| Answer» E. | |
| 48. |
If banks and the private sector decide to hold less cash the money multiplier will be ? |
| A. | Unchanged |
| B. | Larger |
| C. | Smaller |
| D. | Unstable |
| Answer» C. Smaller | |
| 49. |
Government Securities with terms of more than one year are called ? |
| A. | bills of exchanges |
| B. | government bonds |
| C. | Treasury bills |
| D. | Capital bills |
| Answer» C. Treasury bills | |
| 50. |
For the Central bank to keep the interest rat unchanged as the government increase spending, the Central Bank must continue to ? |
| A. | decrease the money supply |
| B. | increase the money supply |
| C. | increase the demand for money |
| D. | decrease the demand for money |
| Answer» C. increase the demand for money | |