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Money, Interest Rates And Output MCQs

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Question 61 Money, Interest Rates And Output

What does each point on the IS curve represent?

Correct answer C. Goods market equilibrium for the given interest rate

Open question

Question 62 Money, Interest Rates And Output

Which curve shows the positive relationship between equilibrium aggregate output and the interest rate in the money market?

Correct answer B. LM curve

Open question

Question 63 Money, Interest Rates And Output

What does each point on the LM curve represent?

Correct answer B. Money market equilibrium for different combinations of interest rates and output

Open question

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Question 64 Money, Interest Rates And Output

How do banks create money?

Correct answer B. Lending out part of their deposits

Open question

Question 65 Money, Interest Rates And Output

If banks and the private sector decide to hold less cash, what happens to the money multiplier?

Correct answer C. Larger

Open question

Question 66 Money, Interest Rates And Output

If I keep some money available in case I come across a bargain, which kind of money demand is this?

Correct answer B. Precautionary demand for money

Open question

Question 67 Money, Interest Rates And Output

Other things being equal, what happens to the quantity of real money balances held when interest rates rise?

Correct answer A. Fall

Open question

Question 68 Money, Interest Rates And Output

What kind of measure of money is M4, and which institutions’ deposits does it include?

Correct answer B. Wide; banks, building societies

Open question

Question 69 Money, Interest Rates And Output

When a central bank buys financial securities on the open market to expand the monetary base, what is this an example of?

Correct answer A. Open market operations

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Question 70 Money, Interest Rates And Output

Central banks prefer to fix which variable and accept the resulting value of which other variable?

Correct answer D. Interest rate, equilibrium money supply

Open question

Question 71 Money, Interest Rates And Output

A cut in interest rates is accompanied by an increase in the monetary base. What happens to the availability and the cost of consumer credit?

Correct answer D. Increase, reduction

Open question