Deck 5: Understanding Inflation, Business Cycles, and Monetary Policy

Question 1

What is Cost-Push inflation?

A)increasing money supply
B)increasing indirect tax
C)population increase
D)expenditure increase unnecessarily.

Answer 1

increasing indirect tax

Question 2

Inflation is the state in which ..............................

A)the value of money decreases
B)the value of money increases
C)the value of the money increases first and then decreases
D)the value of money decreases first and increases later

Answer 2

the value of money decreases

Question 3

Which of the following class will not be negatively affected by the higher inflation?

A)the consumer class
B)the debtor class
C)pensioner class
D)business class

Answer 3

business class

Question 4

Which of the following is an effect of inflation?

A)erosion in purchasing power
B)affects relative price of goods
C)increase in inequalities of income
D)all the above

Question 5

The government spending multiplier is as higher as:

A)higher is the government spending
B)higher is the mpc
C)lower is the mpc
D)lower is the tax revenue

Question 6

Point out which of the following is not an instrument of fiscal policy:

A)an increase in the interest rate
B)a cut in unemployment compensation
C)an increase in tobacco taxes
D)a cut in the marginal rates of irpf

Question 7

The function of investment spending shifts to the left if:

A)the interest rate rises
B)the interest rate falls
C)business expectations improve
D)business expectations get worse

Question 8

An increase in the interest rate1

A)shifts the aggregate demand curve to the left
B)shifts the aggregate demand curve to the right
C)has no effect
D)moves the economy along the aggregate demand curve

Question 9

As higher is the MPS

A)lower is the multiplier.
B)higher is the investment spending
C)higher is the equilibrium income.
D)all the answers are right

Question 10

To increase the money supply, the bank central could:

A)cut taxes
B)purchase bonds in the open-market
C)encourage people to held more cash (currency in circulation)
D)increase the government spending

Question 11

The variable that connect the market of money and the market of goods via investment spending is:

A)the mpc
B)the interest rate
C)the mps
D)the cpi

Question 12

Point out the monetary policy instrument:

A)an increase in direct taxes
B)open-market operations
C)freezing pensions
D)a cut in government purchase of goods and services

Question 13

Monetary Policy is a regulatory policy by which the -------or monetary authority of a country controls the supply of money, availability of bank credit and cost of money that is the rate of interest:

A)central bank (rbi)
B)sbi
C)iba
D)none of these

Question 14

-------controls the supply of money and bank credit:

A)rbi
B)indian banking association
C)sebi
D)none of these

Question 15

The main objective of monetary policy in India is-------:

A)growth with stability
B)reduce poverty and achieve stability
C)overall monetary stability
D)none of these

Question 16

The Cash Reserve Ratio is an effective instrument of credit control. Under the RBI Act, 1934 every -------bank has to keep certain minimum cash reserves with RBI:

A)public bank
B)commercial bank
C)industrial and agricultural banks
D)none of these

Question 17

If RBI wants to increase the credit flow it buys -------:

A)government securities
B)shares and debentures
C)other local and short-term securities
D)none of these

Question 18

Trade between two countries is called

A)Internal trade
B)Intra-Country trade
C)Intra-State Trade
D)International Trade