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Other, Social Studies, Business
11th -
12thgrade
Demand-Side Policies
18 questions
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- 1. Multiple Choice
The policy of the central bank of decreasing the money supply in order to decrease aggregate demand is called _____________________ and works by _____________________.
contractionary monetary policy / increasing interest rates
contractionary monetary policy / decreasing interest rates
expansionary monetary policy / decreasing interest rates
expansionary monetary policy / increasing interest rates
- 2. Multiple Choice
In the money market, if the quantity of money demanded is greater than the quantity of money supplied, the interest rate will
rise
fall
remain unchanged
rise or fall depending on the amount of excess demand for money
- 3. Multiple Choice
If an economy faces a deflationary gap, the appropriate policy response may be
expansionary demand-side policies
expansionary fiscal policy
expansionary monetary policy
all of the above
- 4. Multiple Choice
Contractionary monetary and fiscal policies may be called for when the economy is
in a deflationary gap
in an inflationary gap
in full employment equilibrium
at a trough (downturn) in its business cycle
- 5. Multiple Choice
Fiscal policy involves
actions taken by the government to promote a more equal distribution of income
actions taken by the central bank to influence the money supply and interest rates
tax policies of the government
government policies on taxes and its own expenditure undertaken to influence aggregate demand
- 6. Multiple Choice
Which of the following can work as automatic stabilisers?
progressive taxes and unemployment benefits
regressive taxes and unemployment benefits
progressive taxes and subsidies
unemployment benefits and subsidies
- 7. Multiple Choice
When the government increases its spending by borrowing, it may lead to a decrease in private investment. This is called
balanced budget
crowding out
industrial policy
deregulation
- 8. Multiple Choice
Expansionary fiscal policy undertaken by the government involves
decreasing taxes and increasing government spending
increasing taxes and decreasing government spending
increasing taxes and increasing government spending
decreasing taxes and decreasing government spending
- 9. Multiple Choice
Rather than focus on the objectives of low inflation and low unemployment, some central banks pursue an alternative policy that involves
avoiding crowding out
setting an inflation target
achieving a balanced budget
reducing the level of public debt
- 10. Multiple Choice
Which of the following is not among the strengths of fiscal policy?
it can lead to crowding out
it can pull an economy out of deep recession
it can target specific sectors of the economy
it can lead to increases in potential output through its supply-side effects
- 11. Multiple Choice
Which of the following can be a weakness of monetary policy?
its lack of political constraints
its possible performance in a deep recession
its incremental adjustment of interest rates
its effects on budget deficits and debt
- 12. Multiple Choice
Contractionary demand-side policies may be problematic in dealing with cost-push inflation because
they make the inflation worse
they increase structural unemployment
they make the recession worse
they may be ineffective in reducing inflation
- 13. Multiple Choice
Which of the following is not a role of the central bank?
banker to the business sector
banker to commercial banks
regulator of commercial banks
conduct monetary policy
- 14. Multiple Choice
The minimum reserve requirement is
the minimum amount of money commercial banks require customers to deposit to open an account
the minimum amount of deposited money the central bank is required to keep in reserves
the minimum amount of deposited money that commercial banks must keep in reserves
the minimum amount of money the central bank keeps in reserves before lending to commercial banks
- 15. Multiple Choice
A key difference between open market operations and quantitative easing is that
open market operations involve buying and selling government bonds of much lower value than quantitative easing
open market operations involve buying and selling government bonds of much higher value than quantitative easing
open market operations involve buying and selling government bonds while quantitative easing also involves buying and selling a broad variety of commercial financial assets
open market operations are policies intended to influence aggregate supply, while quantitative easing is intended to influence aggregate demand
- 16. Multiple Choice
The real interest rate is equal to
the rate of inflation plus the nominal interest rate
the nominal interest rate plus the rate of inflation
the rate of inflation minus the nominal interest rate
the nominal interest rate minus the rate of inflation
- 17. Multiple Choice
Which of the following is not a source of government revenue?
direct and indirect taxes
the sale of goods and services
nationalization
privatization
- 18. Multiple Choice
An example of a current expenditure is _____________________. An example of a capital expenditure is _____________________. An example of a transfer payment is _____________________.
a wage for a government employee / a new road / universal basic income
an unemployment benefit / a new airport / a child allowance
a subsidy / a medical supply / a welfare payment
a health care service / a new school / paper for office supplies
- Answer choicesTagsAnswer choicesTags