Monetary Policy
79 questions· page 1 of 8
The diagram shows aggregate demand (AD) and long-run aggregate supply (LRAS) with X as the initial equilibrium.
Which combination of policy and new final equilibrium point is correct?
Options
| policy | new final equilibrium point | |
|---|---|---|
| A | increased direct taxation | F |
| B | increased government spending on infrastructure | G |
| C | appreciation of the exchange rates | H |
| ** | D** | decreased interest rates |
A country's central bank decides to reduce the level of credit regulation.
What is this an example of?
Options
A contractionary fiscal policy
B contractionary monetary policy
C expansionary fiscal policy
D expansionary monetary policy
What is not an example of monetary policy?
Options
A a rise in import tariffs on manufactured goods
B a rise in interest rates by the central bank
C a rise in credit regulations
D a rise in the money supply
A government uses expansionary monetary policy over a three-year period.
Which combination identifies the likely impact of such a policy?
Options
| real GDP | price level | unemployment | |
|---|---|---|---|
| A | falling | rising | falling |
| B | rising | rising | rising |
| C | rising | rising | falling |
| D | rising | falling | rising |
What is likely to be an expansionary monetary policy?
Options
A a decrease in the availability of credit
B a decrease in the exchange rate
C an increase in government spending
D an increase in subsidies for training
A government wants to operate a tighter monetary policy.
What would it increase?
Options
A budget surplus
B interest rate
C money supply
D rates of taxation
A government has a target to reduce the rate of inflation.
Why might it not want to raise interest rates to achieve this target?
Options
A aggregate demand may fall
B aggregate supply may fall
C saving may fall
D the exchange rate may fall
If a country is suffering from deflation, what would be the best policy to reflate the economy?
Options
A increase corporation tax
B increase income tax
C reduce interest rates
D reduce spending on education
What is not a monetary policy measure?
Options
A credit regulations for banks
B interest rate changes
C increased government subsidies
D money supply changes
The government has a macroeconomic objective of low unemployment. It has recently decreased interest rates.
What may limit the effectiveness of this tool in achieving the objective of low unemployment?
Options
A a lack of productive capacity
B excess demand in the economy
C increased government spending on infrastructure
D low levels of welfare benefits