Economics MCQs with Answers – Micro and Macro – Page 22

Question 421 Money, Interest Rates And Output

What is the idea that government spending reduces private investment called?

Correct answer B. Crowding-out

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Question 422 Money, Interest Rates And Output

Through which channel is government spending supposed to reduce private investment?

Correct answer B. Interest rates

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Question 423 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

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Question 424 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

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Question 425 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

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Question 426 Money, Interest Rates And Output

How do banks create money?

Correct answer B. Lending out part of their deposits

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Question 427 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

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Question 428 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

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Question 429 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

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Question 430 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

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Question 431 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 432 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

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Question 433 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

Question 434 Monetary, Fiscal And Incomes Policy, And Inflation

Monetary policy affects which two variables?

Correct answer C. Money supply, interest rate

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Question 435 Monetary, Fiscal And Incomes Policy, And Inflation

What are the Bank of England and the Federal Reserve?

Correct answer D. Are central banks

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Question 436 Monetary, Fiscal And Incomes Policy, And Inflation

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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Question 437 Monetary, Fiscal And Incomes Policy, And Inflation

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

Open question

Question 438 Monetary, Fiscal And Incomes Policy, And Inflation

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

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Question 439 Monetary, Fiscal And Incomes Policy, And Inflation

Which problem do policymakers typically face during stagflation?

Correct answer B. Contradictory goals, since stimulating demand worsens inflation while restraining it deepens unemployment

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Question 440 Monetary, Fiscal And Incomes Policy, And Inflation

Under which type of inflation do prices rise in one sector, stay the same in another and increase overall?

Correct answer C. Ratchet inflation

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