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1) The implementation lag for monetary policy is generally ? a. the same as it is for fiscal policy b. much shorter than it is for fiscal policy c. mush longer than it is for fiscal policy d. unrelated to central bank action
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2) The budget deficit tends to decrease then ? a. GDP decrease rapidly b. GDP remains unchanged c. GDP decrease slightly d. GDP increase
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3) Automatic stabilizers act to ______ government expenditures and _______ government revenue during an expansionary period? a. increase; increase b. decrease; increase c. increase; decrease d. decrease; decrease
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4) Net taxes are ? a. taxes paid by firms and households to the government minus the cost of collecting the taxes b. Taxes paid firms and households to the government minus the transfer payments made to firms and household c. Taxes paid by firms and households to the government plus transfer payments made to firm and households d. government expenditures minus government revenues
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5) As an economy grows ? a. The government’s budget position should automatically improve b. The government’s budget position should automatically worsen c. This will have no effect on the government’s budget position d. This will reduce the government’s tax revenue
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6) The public Sector Net Cash Requirement (PSNCR) is ? a. A measure of the country’s trade position b. A measure of the country’s budget position c. A measure of the country’s total debt d. A measure of the government’s monetary stance
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7) The marginal rate of tax paid is ? a. The total tax paid / total income b. Total income / total tax paid c. Change in the tax paid / change in income d. Change in income / change in tax paid
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8) Imagine there is no tax on income up to Rs 1000 after that there is a tax of 505 what is the average tax rate on an income of Rs 20,000 ? a. Rs 50000 b. 20% c. 25% d. Rs 10000
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9) Fiscal drag occurs when ? a. Tax bands do not increase with inflation b. Tax rates move inversely with inflation c. Government spending falls to reduce aggregate demand d. Tax banks increase with inflation
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10) By controlling the monetary base economists mean ? a. making banks keep a certain % of their assets as M0 b. controlling the money multiplier c. restricting the amount of cash in circulation d. not allowing commercial banks to issue notes and coins
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11) If the state Bank of Pakistan wished to pursue an expansionary monetary policy it would ? a. increase the minimum reserve asset ratio. b. buy government securities on the open market c. raise interest rates d. sell government securities on the open market
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12) By financial crowding out economist mean ? a. credit rationing b. government borrowing drives up interest rates c. Bank of England controls on commercial bank lending d. what the government borrows cannot be used for private investment
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13) The idea that the money supply should change to accommodate changes in aggregate demand is associated with the idea of ? a. Margaret Thatcher b. Ronald Reagan c. Milton Friedman d. John Maynard Keynes
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14) The multiple by which total deposits can increase for every pound increase in reserves is the ? a. Money multiplier b. liquidity ratio c. bank’s line of credit d. required reserve ratio
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15) The response lag of stabilization policy represents ? a. the time that it takes for policy makers to recognize the existence of boom of bust b. the time needed for parliament to agree to a tax cut. c. the time that is necessary to put the desired policy into effect d. the time that it takes for the economy to adjust to the new conditions after a new policy has been implemented
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16) Time lags which often erode effectiveness of monetary and fiscal policy measures represent ? a. delays in the response of the economy is stabilization policy b. the foreign response to price changes c. the change in exports and imports prices d. the change in exchange rates
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17) The negative effect on the economy that occurs when average tax rates increase because taxpayers have moved into higher income brackets during an expansion is ? a. debt burden b. the Laffer curves c. bracket creep d. fiscal drag
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18) Automatic stabilisers act to ____ government expenditures and ____ government revenues during recessions ? a. increase: increase b. decrease; decrease c. increase; decrease d. decrease; increase
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19) Fiscal Policy refers to ? a. The government regulation of financial intermediaries b. The spending and taxing policies used by the government to influence the economy c. The actions of the central bank in controlling the money supply d. The government’s attitude to taxation
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