Economics MCQs with Answers – Micro and Macro – Page 21

Correct answer C. 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 expected to increase the supply of liquidity to the banks.

Open question

Question 406 Money, Interest Rates And Output

What are government securities with a term of more than one year called?

Correct answer B. Government bonds

Open question

Question 407 Money, Interest Rates And Output

What is the name for an item declared to be money that has no intrinsic worth?

Correct answer A. Fiat money

Open question

Question 408 Money, Interest Rates And Output

Which of these is counted in broad money but not in narrow money?

Correct answer B. Savings accounts

Open question

Question 409 Money, Interest Rates And Output

Which of these is one of the Bank of England’s responsibilities towards the banking system?

Correct answer B. Assisting Banks that are in a difficult financial position

Open question

Question 410 Money, Interest Rates And Output

What happens to the money multiplier when the required reserve ratio is lowered?

Correct answer D. Increases

Open question

Question 411 Money, Interest Rates And Output

Commercial banks are holding excess reserves because firms and consumers do not want to borrow. What is a cut in the discount rate likely to do?

Correct answer B. Not change the money supply because banks already have excess reserves they cannot lend

Open question

Question 412 Money, Interest Rates And Output

When economists talk about the demand for money, what question are they asking?

Correct answer C. What proportion of your financial assets do you want to hold in non-interest-bearing forms

Open question

Question 413 Money, Interest Rates And Output

Which of these events would lower the equilibrium interest rate?

Correct answer B. A decrease in the price level

Open question

Question 414 Money, Interest Rates And Output

Which motive for holding money relates to investors timing their purchases and sales of bonds according to expected changes in interest rates?

Correct answer C. Speculative motive

Open question

Question 415 Money, Interest Rates And Output

What relationship does the demand for money represent?

Correct answer C. A negative relationship between the interest rate and the quantity of money demanded

Open question

Question 416 Money, Interest Rates And Output

In which market is the equilibrium level of aggregate output determined?

Correct answer A. The goods market

Open question

Question 417 Money, Interest Rates And Output

In which market is the interest rate determined?

Correct answer B. The money market

Open question

Question 418 Money, Interest Rates And Output

Which of the following is an example of expansionary monetary policy?

Correct answer C. The Central bank buying government securities in the open market

Open question

Question 419 Money, Interest Rates And Output

If the investment demand curve is vertical, how effective are monetary and fiscal policy?

Correct answer B. Monetary policy is ineffective but fiscal policy is effective

Open question

Question 420 Money, Interest Rates And Output

If the central bank tries to hold the interest rate constant while the economy is on the steep part of the AS curve, what will occur?

Correct answer D. A hyperinflation

Open question