Pak
QuizHub
Home
Important MCQs
Past Papers
About
Contact
Privacy
Fiscal And Monetary Policy
/
MCQs
Fiscal And Monetary Policy – MCQs
29 questions. Click to practice.
Show Answers
Correct options are highlighted when revealed.
1.
Why might a government impose taxes on certain goods or services?
To reduce the use of goods that generate beneficial external effects
To limit the consumption of goods provided by the public sector
To decrease the usage of goods that are considered socially desirable
To lower the consumption of goods causing harmful external impacts
2.
Which statement accurately describes a regressive tax system?
The total tax paid rises as income grows.
The tax rate on additional income decreases as earnings go up.
The average tax rate declines when income increases.
The average tax rate remains unchanged regardless of income level.
3.
What is the automatic effect on the government's budget balance when the economy experiences growth?
Deteriorate
Get better
Remain unchanged
Rise along with inflation
4.
If the marginal tax rate is 40% and an individual's income rises from Rs 10,000 to Rs 12,000, what will be the total tax amount paid?
The tax paid will go up by Rs 4,800
The tax paid will increase by Rs 4,000
The tax paid will rise by Rs 800
The overall tax paid will be Rs 4,800
The total tax paid will be Rs 4,000
5.
Which of the following actions aligns with a reflationary (expansionary) fiscal policy?
Reducing interest rates
Boosting bank lending activities
Raising corporate tax rates
Increasing government discretionary expenditures
6.
What does over-funding mean in the context of the State Bank of Pakistan's actions?
Issues fewer government bonds than needed to cover the Public Sector Borrowing Requirement (PSBR)
Issues more government bonds than necessary to meet the Public Sector Borrowing Requirement (PSBR)
Conducts sales of government securities in the open market
Purchases government securities from the open market
7.
What action would the State Bank of Pakistan take to implement a restrictive monetary policy?
Decrease the required reserve ratio for banks.
Purchase government bonds in the open market.
Cut down the prevailing interest rates.
Sell government bonds through open market operations.
Increase the money supply by lowering reserve requirements.
8.
What does Goodhart’s Law imply?
Inferior currency tends to replace superior currency.
Monetary policy is effective only when applied over an extended period.
Regulating one component of the money supply simply causes that component to lose significance.
The money supply should increase only in line with the growth of real national income.
9.
What happens to the money multiplier when the required reserve ratio is lowered?
It might go up or down
It declines
It rises
It stays unchanged if banks do not keep excess reserves
10.
What does the parable of Riding a Switchback imply about the timing of stabilization policies?
They fail to adequately boost or slow down the economy when needed.
They work as intended.
They tend to stimulate or restrain the economy at inappropriate moments.
They are beneficial and recommended.
11.
How does the implementation delay of monetary policy typically compare to that of fiscal policy?
It is equal in duration to fiscal policy delays.
It is significantly shorter than the delay for fiscal policy.
It is considerably longer than the delay for fiscal policy.
It has no connection to actions taken by the central bank.
It varies independently without any consistent pattern.
12.
What is the usual effect on GDP when the budget deficit starts to decline?
GDP falls sharply
GDP stays constant
GDP declines marginally
GDP rises
None of the above
13.
During an economic expansion, automatic stabilizers function to ______ government spending and ______ government income.
raise; raise
reduce; raise
raise; lower
reduce; lower
maintain; maintain
14.
What are net taxes defined as?
Taxes collected from businesses and individuals by the government after deducting the expenses involved in tax collection
Taxes paid by businesses and individuals to the government minus the transfer payments given back to them
The sum of taxes paid by businesses and individuals plus the transfer payments received by them
The difference between government spending and government income
None of the above
15.
What is the expected impact on the government's budget balance as the economy experiences growth?
The government's fiscal balance is likely to improve automatically
The government's fiscal balance is likely to deteriorate automatically
There will be no change in the government's fiscal balance
Government tax revenues will decrease
Government expenditures will remain unchanged
16.
What does the Public Sector Net Cash Requirement (PSNCR) represent?
An indicator of the nation's trade balance
An indicator of the government's fiscal status
An indicator of the country's overall debt level
An indicator of the government's monetary policy
17.
What does the marginal tax rate represent?
The overall tax amount divided by the total earnings
Total earnings divided by the overall tax amount
The variation in tax paid divided by the variation in income
The variation in income divided by the variation in tax paid
18.
If income up to Rs 1,000 is exempt from tax and any income above that is taxed at 5%, what is the average tax rate for an income of Rs 20,000?
Rs 50,000
20%
25%
Rs 10,000
15%
19.
When does fiscal drag take place?
When tax brackets remain unchanged despite inflation
When tax rates decrease as inflation rises
When the government reduces its expenditures to lower overall demand
When tax bands rise in line with inflation
20.
What do economists refer to when they talk about managing the monetary base?
Requiring banks to hold a fixed percentage of their assets as M0
Regulating the money multiplier effect
Limiting the total cash available in the economy
Prohibiting commercial banks from issuing currency notes and coins
← Previous
Page 1 of 2
Next →
Fiscal And Monetary Policy – MCQs | PakQuizHub