Economics MCQs with Answers – Micro and Macro – Page 20

Question 381 Money, Interest Rates And Output

What is an increase in the money supply designed to raise aggregate output called?

Correct answer C. Expansionary monetary policy

Question 382 Money, Interest Rates And Output

Which statement about the interest rate is correct?

Correct answer C. Is determined in the money market and influences the level of planned investment and thus the goods market

Open question

Question 383 Money, Interest Rates And Output

To keep the interest rate unchanged when government spending rises, what must the central bank keep doing?

Correct answer B. Increase the money supply

Open question

Question 384 Money, Interest Rates And Output

In the simple Keynesian view, what shape is the aggregate supply curve?

Correct answer C. Horizontal until it reaches full capacity and then becomes vertical

Open question

Question 385 Money, Interest Rates And Output

If the central bank expands the money supply at the same time as the government raises spending, what is likely to happen to investment?

Correct answer D. Not be reduced as much as it would have been

Open question

Question 386 Money, Interest Rates And Output

If planned investment becomes more sensitive to changes in the interest rate, what happens to the crowding-out effect?

Correct answer A. Be increased

Open question

Question 387 Money, Interest Rates And Output

Which curve shows the negative relationship between equilibrium aggregate output and the interest rate in the goods market?

Correct answer B. IS curve

Open question

Question 388 Money, Interest Rates And Output

What happens when the money supply increases?

Correct answer A. The LM curve shifts to the right

Open question

Question 389 Money, Interest Rates And Output

Keynesians and monetarists disagree about how steep the IS and LM curves are. According to monetarists, what are the slopes of the IS and LM curves?

Correct answer C. Flat; steep

Open question

Question 390 Money, Interest Rates And Output

What is the primary aim of a commercial bank?

Correct answer B. Make a profit

Open question

Question 391 Money, Interest Rates And Output

What does the money supply consist of?

Correct answer C. Currency in circulation plus bank deposits

Open question

Question 392 Money, Interest Rates And Output

Which three variables affect the demand for money?

Correct answer B. The price level, interest rates, real income

Open question

Question 393 Money, Interest Rates And Output

Other things being equal, what happens to the demand for real money balances when real income rises?

Correct answer C. Increase

Open question

Question 394 Money, Interest Rates And Output

What does the monetary base consist of?

Correct answer B. Currency in circulation, banks’ cash reserves

Open question

Question 395 Money, Interest Rates And Output

Which of the following would change equilibrium in the money market?

Correct answer A. Any of the above

Open question

Question 396 Money, Interest Rates And Output

One transmission channel of monetary policy works through consumer demand. When interest rates rise, what happens to household wealth and to consumption?

Correct answer D. Rise; falls; falls

Open question

Question 397 Money, Interest Rates And Output

What can cause investment demand to fall?

Correct answer D. All of the above

Open question

Question 398 Money, Interest Rates And Output

Which of these is NOT a function of money?

Correct answer A. Hedge against inflation

Open question

Question 399 Money, Interest Rates And Output

Which statement about commodity money is true?

Correct answer B. Has intrinsic value

Open question

Question 400 Money, Interest Rates And Output

Banca Solida has always kept a reserve ratio of 25 percent. It is taken over by Gung-Ho Bank, which keeps a reserve ratio of 12.5 percent. If Banca Solida adopts its new owner’s practices, what happens to the money supply in its country?

Correct answer D. Money supply will increase because Banca Solida will increase its loans

Open question