Economics Practice MCQ Page 26

Multiple Choice questions for Economics in the sets of 10 each on one page with questions and answers. All sets are useful in the preparation of subject tests for employment or admission.
Question: 1666   When the Federal Reserve purchases a $10,000 government bond,the money supply
  1. increases by $10,000.
  2. increases by more than $10,000.
  3. decreases by less than $10,000.
  4. decreases by $10,000.
  5. decreases by more than $10,000.
Question: 1667   The two important lags in the conduct monetary policy are the recognition and the
  1. effectiveness lag.
  2. operation lag.
  3. base lag.
  4. political lag.
Question: 1669   Milton Friedman believes the effectiveness lag to be
  1. short and variable.
  2. long and variable.
  3. short and constant.
  4. long and constant.
Question: 1672   The ratio of the money supply to the monetary base increases if
  1. banks decide to hold a larger fraction of deposits as reserves.
  2. households decide to hold a larger fraction of money as currency.
  3. the Fed expands the monetary base.
  4. banks decide to hold a smaller fraction of deposits as reserves.
  5. households expands their overall demand for money.
Question: 1674   The size of money supply is determined by the action of
  1. the Fed.
  2. the Fed and banks.
  3. banks.
  4. the Fed,banks and the public.
  5. the Fed and the public.
Question: 1675   The verbal that keynes believed is most directly affected by a change in the money supply is
  1. the price level.
  2. the interest rate.
  3. the inflation rate.
  4. output.
  5. unemployment.
Question: 1677   An increase in the money supply causes the aggregate demand curve to
  1. not change.
  2. shift upward in proportion to the increase in the money supply .
  3. shift to the right in proportion to the increase in the money supply.
  4. shift downward in proportion to the increase in the money supply.
  5. shift to the left in proportion to the increase in the money supply .
Question: 1680   If the aggregate supply curve horizontal ,then a 10 percent increase in the money supply leads to `
  1. a 10 percent increase in prices.
  2. a 10 percent increase in output.
  3. an increase in prices of less 10 percent.
  4. an increase in both prices and output.
  5. an increase in output of intermediate size.
Question: 1681   According to the keynesian model ,a deflationary gap calls for
  1. expansionary monetary policy.
  2. contractionary monetary policy.
  3. no change in monetary policy .
  4. an increase in the discount rate.credit controls.
Question: 1683   If the investment demand curve shift to the left and the Fed maintains a constant interest rate ,then the resulting recession will be
  1. completely eliminated.
  2. less serve than if the Fed held the money supply constant.
  3. the same as if the Fed held the money supply constant.
  4. more severe than if the Fed held the money supply constant .
  5. endless because the self-correction mechanism of the economy will be disbled.
Question: 1684   The monetary policy favored by monetarists is
  1. a steadily increasing rate of monetary growth.
  2. a constant and slow rate of monetary growth.
  3. vigorous monetary expansion during recessions.
  4. a constant (nongrowing)money supply.
  5. a moderate countercyclical policy of monetary growth .
Question: 1686   A major drawback to using the reserve requirement to conduct monetary policy is that
  1. it is an unfair subsidy to the banking system.
  2. it has only weak announcement effects.
  3. it is too powerful to use one on a daily basis.
  4. it would require interest rate targeting.

Answers to the questions of Economics on this page

Following list gives the correct choice for the answer of the Economics mcqs.
1666 . B       1667 . A       1669 . A       1672 . A       1674 . D       1675 . B       1677 . B       1680 . E       1681 . A       1683 . D       1684 . B       1686 . C      

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