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Fiscal And Monetary Policy
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Fiscal And Monetary Policy – MCQs
29 questions. Click to practice.
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Correct options are highlighted when revealed.
1.
What action would the State Bank of Pakistan take to implement an expansionary monetary policy?
Raise the required reserve ratio for banks.
Purchase government bonds in the open market.
Increase the benchmark interest rates.
Sell government bonds through open market operations.
Reduce the cash reserve requirement.
2.
What do economists refer to when they talk about financial crowding out?
Restrictions on the availability of loans
Government borrowing causes interest rates to increase
Regulations by the Bank of England on lending by commercial banks
Government borrowing reduces funds available for private sector investment
3.
Which economist is known for the concept that the money supply should adjust in response to shifts in aggregate demand?
Margaret Thatcher
Ronald Reagan
Milton Friedman
John Maynard Keynes
4.
What term describes the factor that determines how much total deposits can grow for each additional pound of reserves?
Money multiplier
Liquidity ratio
Bank's credit facility
Mandatory reserve ratio
5.
What does the response lag in stabilization policy refer to?
The duration required for policymakers to identify whether the economy is overheating or in recession.
The period needed for the legislature to approve a fiscal stimulus measure.
The interval necessary to enact the intended policy after its decision.
The time taken by the economy to respond and adjust following the implementation of a new policy.
6.
What term describes the delays that typically reduce the effectiveness of monetary and fiscal policy actions?
The lag in the economy's reaction to stabilization policies
The international reaction to shifts in prices
Variations in the prices of exports and imports
Fluctuations in currency exchange rates
7.
What is the term for the economic drawback that happens when rising average tax rates result from taxpayers advancing into higher income brackets during an economic expansion?
government debt pressure
the Laffer curve effect
income bracket inflation
tax-induced economic slowdown
revenue shrinkage
8.
During economic downturns, automatic stabilizers function to ____ government spending and ____ tax income?
raise; raise
reduce; reduce
raise; reduce
reduce; raise
9.
What does fiscal policy primarily involve?
Government oversight of financial institutions
Government decisions on taxation and expenditure to steer the economy
Central bank measures to regulate the money supply
The government's approach toward tax collection
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