Money, Interest Rates & Output Mcqs - Set 2

1)   The curve that illustrates the positive relationship between the equilibrium values of aggregate output and the interest rate in the money market is the ?

a. money supply curve
b. LM curve
c. money demand curve
d. IS curve
Answer  Explanation 

ANSWER: LM curve

Explanation:
No explanation is available for this question!


2)   Each point on the IS curve represents the equilibrium point in the ?

a. goods market for the given interest rate
b. goods market for the given level of government spending
c. money market for the given level of the money supply
d. money market for the given value of aggregate output
Answer  Explanation 

ANSWER: goods market for the given interest rate

Explanation:
No explanation is available for this question!


3)   The way in which government spending is supposed to reduce investment is by increasing ?

a. incomes
b. overseas investment
c. imports
d. interest rates
Answer  Explanation 

ANSWER: interest rates

Explanation:
No explanation is available for this question!


4)   The idea the government spending causes a reduction in private investment is called ?

a. fiscal drag
b. investment blight
c. crowding-out
d. the Thatcher effects
Answer  Explanation 

ANSWER: crowding-out

Explanation:
No explanation is available for this question!


5)   If The Central bank tries to keep the interest rate constant when the economy is operating on the steep part of the AS curve, _________ will occur?

a. a hyperinflation
b. a depression
c. stagflation
d. a recession
Answer  Explanation 

ANSWER: a hyperinflation

Explanation:
No explanation is available for this question!


6)   If the investment demand curve is vertical ?

a. both monetary and fiscal policy are ineffective
b. monetary policy is effective but fiscal policy is ineffective
c. monetary policy is ineffective but fiscal policy is effective
d. both monetary and fiscal policy are effective
Answer  Explanation 

ANSWER: monetary policy is ineffective but fiscal policy is effective

Explanation:
No explanation is available for this question!


7)   An example of an expansionary monetary policy is ?

a. a reduction in the taxes banks pay on their profits.
b. an increase in the required reserve ratio
c. an increase in the discount rate
d. the Central bank buying government securities in the open market
Answer  Explanation 

ANSWER: the Central bank buying government securities in the open market

Explanation:
No explanation is available for this question!


8)   The interest rate is determined in ?

a. the money and labor markets
b. the goods and labor markets
c. the goods market
d. the money markets
Answer  Explanation 

ANSWER: the money markets

Explanation:
No explanation is available for this question!


9)   The equilibrium level of aggregate output is determined in ?

a. the goods and labor markets.
b. the goods market
c. the money markets
d. the money and labor market
Answer  Explanation 

ANSWER: the goods market

Explanation:
No explanation is available for this question!


10)   The demand for money represents the idea that there is ?

a. a positive relationship between the interest rate and the quantity of money demanded
b. a negative relationship between the price level and the quantity of money demanded
c. a negative relationship between the level of aggregate output and the quantity of money demanded
d. a negative relationship between the interest rate and the quantity of money demanded
Answer  Explanation 

ANSWER: a negative relationship between the interest rate and the quantity of money demanded

Explanation:
No explanation is available for this question!