Monetary policy affects which two variables?
Correct answer C. Money supply, interest rate
Topic / 15 questions
Monetary, Fiscal And Incomes Policy, And Inflation MCQs
Monetary, Fiscal And Incomes Policy, And Inflation MCQs cover how governments and central banks manage demand, taxes and wages to control inflation and support growth. They help economics students and competitive exam candidates, and each question reveals its correct answer immediately so you can test your policy knowledge.
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What are the Bank of England and the Federal Reserve?
Correct answer D. Are central banks
If people with higher incomes pay a larger percentage of their income in tax, what kind of income tax structure is this?
Correct answer D. Progressive
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Fiscal incentives used to attract foreign businesses include: I. tax holidays, II. accelerated depreciation, III. import duty relief, IV. lower tax rates on reinvested profits. Which are correct?
Correct answer A. All of I, II, III and IV
Inflation is measured by which of the following: I. the consumer price index (CPI), II. the GDP deflator, III. the current account, IV. depreciation?
Correct answer A. I and II only
Which problem do policymakers typically face during stagflation?
Correct answer B. Contradictory goals, since stimulating demand worsens inflation while restraining it deepens unemployment
Under which type of inflation do prices rise in one sector, stay the same in another and increase overall?
Correct answer C. Ratchet inflation
What causes demand-pull inflation?
Correct answer C. Consumer, business and government demand for goods and services in excess of an economy’s capacity to produce
Through fiscal policy, governments pursue goals for output, employment growth and price stability by varying which two things?
Correct answer B. Tax rates, government spending
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Which principle states that as real GNP per head rises, people demand relatively more social goods and relatively fewer private goods?
Correct answer B. Wagner’s law
Property tax, wealth tax, inheritance tax and income taxes such as personal and corporate tax are examples of which kind of tax?
Correct answer A. Direct taxes
When asymmetric information prevents the financial system from judging investment opportunities, so that bad credit risks may be accepted, what is lending subject to?
Correct answer D. Adverse selection
Central banks in developing countries (LDCs) generally have less effect on expenditure and output than in developed countries because of: I. an externally dependent banking system; II. a poorly developed securities market; III. a low share of demand deposits in the money supply; IV. investment and employment being relatively insensitive to monetary policy. Which apply?
Correct answer B. All of I, II, III and IV
Which of the following are costs of inflation: I. it weakens the development of credit and capital markets; II. it distorts business, especially investment, behaviour; III. it raises the price of foreign goods relative to domestic goods; IV. it imposes a tax on holders of money?
Correct answer B. I, II and IV only
Under financial repression, which statements are true: I. banks ration loans by non-price means; II. banks face pressure to lend to the politically connected; III. banks charge a high premium on foreign investments; IV. banks depend on foreign banks to set interest rates?
Correct answer D. I and II only
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About Monetary, Fiscal And Incomes Policy, And Inflation MCQs
This topic brings together the main tools of macroeconomic management. Questions cover progressive taxation, where people with higher incomes pay a larger share of income in tax, fiscal incentives used to attract foreign businesses, and how monetary policy affects interest rates and the money supply. You will also meet stagflation, a period of rising prices combined with stagnant output and high unemployment, and Wagner's law, which links rising income per head with growing demand for public services. Incomes policy, aimed at controlling wages and prices directly, also features. These ideas appear in CSS economics and banking tests.
Exams that include Monetary, Fiscal And Incomes Policy, And Inflation MCQs
Pakistan
- CSS
- PMS
- PPSC
- Banking job tests
- Lecturer tests
India
- UGC NET
- UPSC CSE
- IBPS PO
- SBI PO
Bangladesh
- BCS
- Bangladesh Bank recruitment
- Bank job exams
Frequently asked questions
What is stagflation?
Stagflation is a situation in which an economy faces high inflation together with slow or stagnant growth and high unemployment. It is hard to treat because policies that reduce inflation can worsen unemployment, while policies that boost demand can push prices higher. Major oil price shocks in the 1970s are a classic example.
What is the difference between monetary and fiscal policy?
Monetary policy is run by the central bank and works through interest rates, the money supply and credit conditions. Fiscal policy is run by the government and works through public spending and taxation. Both aim to stabilise output and prices but use different instruments and institutions.
How many of these MCQs are on MCQs360?
MCQs360 has 15 Monetary, Fiscal and Incomes Policy, and Inflation MCQs in its Economics section. They are free to practise without an account, and each shows its correct answer instantly, which helps you revise policy tools efficiently.
Last reviewed October 2026