Question No: 26    ( Marks: 1 )    - Please choose one

 Aggregate demand curve slopes down because of many reasons which of the following is NOT the reason of its downward slope?

       ► Higher inflation increases real money balances

       ► Higher inflation induces policymakers to raise the real interest rate

       ► Rising inflation also reduces wealth

       ► Rising inflation lowers consumption

   

Question No: 27    ( Marks: 1 )    - Please choose one

 Which of the following is NOT an example of financial institutions?

       ► Bank

       ► Securities firm

       ► Stock exchange

       ► Insurance company

   

Question No: 28    ( Marks: 1 )    - Please choose one

 Which of the following has created an opportunity for small investors to participate in economic activity?

       ► Mutual funds

       ► Small corporations

       ► Stock brokers

       ► Small investors cannot take part in economic activity

   

Question No: 29    ( Marks: 1 )    - Please choose one

 Managing _______ is a major concern for today’s banks.

 

       ► Trading risk

       ► Interest rate risk

       ► Systematic risk

       ► Other risk

   

Question No: 30    ( Marks: 1 )    - Please choose one

 Which of the following is a combination of auto insurance?

 

 

       ► Life insurance and property insurance

       ► Life insurance and causality insurance

       ► Property insurance and casualty insurance

       ► Life insurance and saving account

   

Question No: 31    ( Marks: 1 )    - Please choose one

 Which of the following are the primary uses of funds of depositor institution?

       ► Cash, loans, securities 

       ► Corporate bonds, government bonds, stocks

       ► Commercial paper, bonds, mortgages

       ► Mortgages, consumer loans, business loans

   

Question No: 32    ( Marks: 1 )    - Please choose one

 

Why central bank occupies a privileged position in a country?

 

       ► It controls the availability of money

       ► It controls credit in a country’s economy

       ► All of the given options

       ► It has monopoly on the issuance of currency

   

Question No: 33    ( Marks: 1 )    - Please choose one

 

Which of the following are goals of the Central Bank?

 

       ► Price stability

       ► Stable output growth

       ► Stable financial system

       ► All of the above

   

Question No: 34    ( Marks: 1 )    - Please choose one

 Which of the following is NOT a function of the Central Bank?

 

       ► Conduct economic research

       ► Regulate brokers and insurance companies

       ► Evaluate bank mergers

       ► These are all functions of the fed.

   

Question No: 35    ( Marks: 1 )    - Please choose one

 

Which of the following can expand the size of the balance sheet of a central bank and the monetary base?

 

 

       ► Open market operations

       ► Discounted loans

       ► Foreign exchange intervention

       ► All of the given options

   

Question No: 36    ( Marks: 1 )    - Please choose one

 Difference between _______ and required reserve is the excess reserves.

 

 

       ► Deposits

       ► Securities

       ► Currency

       ► Reserve

   

Question No: 37    ( Marks: 1 )    - Please choose one

 

The withdrawal reduces the banking system’s____________, which is a decrease in its assets, and if the funds come from a checking account, there is a matching decrease in liabilities.

 

 

       ► Vault cash

       ► Securities

       ► Reserves

       ► Currency

   

Question No: 38    ( Marks: 1 )    - Please choose one

 Required reserve ratio and quantity of money have __________.

       ► Direct relation

       ► Inverse relation

       ► No relation

       ► Incomplete information

   

Question No: 39    ( Marks: 1 )    - Please choose one

 The quantity of money people hold for transaction purposes does NOT depends upon:

 

       ► Nominal income

       ► Cost of holding money

       ► Availability of substitutes

       ► Real income

   

Question No: 40    ( Marks: 1 )    - Please choose one

 Higher the level of uncertainty about the future, the higher the demand for money and the _________ the velocity of money.

 

       ► Incomplete information

       ► Lower

       ► Higher

       ► Stable

   

Question No: 41    ( Marks: 1 )    - Please choose one

 Which of the following has a great influence on the aggregate demand?

 

       ► Real interest rate

       ► Nominal interest rate

       ► Effective interest rate

       ► None of the given options

   

Question No: 42    ( Marks: 1 )    - Please choose one

 Which of the following is (are) the factor(s) of aggregate demand?

 

       ► Investment

       ► Govt. purchases

       ► All of the given options

       ► Consumption

    

Question No: 43    ( Marks: 1 )    - Please choose one

 When current inflation raises Monetary policymakers raise the real interest rate, moving _________along the monetary policy reaction curve

 

 

 

       ► Right

       ► Left

       ► Upward

       ► Downward

   

Question No: 44    ( Marks: 1 )    - Please choose one

 Which of the following is shown by the aggregate demand curve?

       ► How sensitive current output is to given change in current inflation

       ► Current output is not sensitive to given change in current inflation

       ► Current output and current inflation both move in the same direction

       ► None of the given options

   

Question No: 45    ( Marks: 1 )    - Please choose one

 Which of the following reason(s) can shift the short run aggregate supply curve?

 

 

       ► Deviation of current output from potential output

       ► Changes in external factors driving production costs

       ► When current output is equal to potential out put

       ► Deviation of current output from potential output and Changes in external factors driving production costs

   

Question No: 46    ( Marks: 1 )    - Please choose one

 Which of the following is determined by the intersection of the aggregate demand curve with the short-run aggregate supply curve?

 

       ► Short-run equilibrium

       ► Long-run equilibrium

       ► Both short-run and long-run equilibrium

       ► None of the given options

   

Question No: 47    ( Marks: 1 )    - Please choose one

 

When current output exceeds potential, the resulting expansionary gap exerts upward pressure on inflation, shifting the short-run aggregate supply curve _____________.

 

       ► Right

       ► Left

       ► Upward

       ► Downward

   

Question No: 48    ( Marks: 1 )    - Please choose one

 Policymakers can shift the aggregate demand curve by shifting their monetary policy reaction curve, but which of the following cannot be shifted by them?

       ► Short-run aggregate supply curve

       ► Long-run aggregate demand curve

       ► Short-run aggregate demand curve

       ► None of the given options

   

Question No: 49    ( Marks: 3 )

 What is the effect of an increase in potential output on inflation and output?

   

Question No: 50    ( Marks: 3 )

 Give an account of different components of aggregate demand?

   

Question No: 51    ( Marks: 5 )

 Give brief explanation of the following.

a)What is Target funds rate?

b) How it is controlled?

c)What will be the impact of target federal rate on economy?