Question 1

What is Cost-Push inflation?&#10;A)increasing money supply&#10;B)increasing indirect tax&#10;C)population increase&#10;D)expenditure increase unnecessarily.

Accepted Answer

Cost-push inflation occurs when the costs of production increase, leading to a decrease in supply. An increase in indirect taxes can raise production costs, thus causing cost-push inflation.

Question 2

Inflation is the state in which ..............................&#10;A)the value of money decreases&#10;B)the value of money increases&#10;C)the value of the money increases first and then decreases&#10;D)the value of money decreases first and increases later

Accepted Answer

Inflation is characterized by a decrease in the purchasing power of money, meaning that each unit of currency buys fewer goods and services than it did before, indicating a decrease in the value of money.

Question 3

Which of the following class will not be negatively affected by the higher inflation?&#10;A)the consumer class&#10;B)the debtor class&#10;C)pensioner class&#10;D)business class

Accepted Answer

The business class will not be negatively affected by higher inflation because they can pass on the increased costs to their customers.

Question 4

Which of the following is an effect of inflation?&#10;A)erosion in purchasing power&#10;B)affects relative price of goods&#10;C)increase in inequalities of income&#10;D)all the above

Accepted Answer

Inflation leads to erosion in purchasing power, affects the relative price of goods, and can increase income inequalities, making all options correct.

Question 5

The government spending multiplier is as higher as:&#10;A)higher is the government spending&#10;B)higher is the mpc&#10;C)lower is the mpc&#10;D)lower is the tax revenue

Accepted Answer

The government spending multiplier is higher when the marginal propensity to consume (mpc) is higher because a higher mpc means that individuals are more likely to spend additional income, leading to a greater impact of government spending on the overall economy.

Question 6

Point out which of the following is not an instrument of fiscal policy:&#10;A)an increase in the interest rate&#10;B)a cut in unemployment compensation&#10;C)an increase in tobacco taxes&#10;D)a cut in the marginal rates of irpf

Accepted Answer

An increase in the interest rate is not an instrument of fiscal policy; it is a tool of monetary policy typically used by central banks to control the money supply. Fiscal policy involves government spending and taxation decisions.

Question 7

The function of investment spending shifts to the left if:&#10;A)the interest rate rises&#10;B)the interest rate falls&#10;C)business expectations improve&#10;D)business expectations get worse

Accepted Answer

The answer of The function of investment spending shifts to...

Question 8

An increase in the interest rate1&#10;A)shifts the aggregate demand curve to the left&#10;B)shifts the aggregate demand curve to the right&#10;C)has no effect&#10;D)moves the economy along the aggregate demand curve

Accepted Answer

An increase in the interest rate typically reduces consumer spending and investment, leading to a decrease in aggregate demand. This is represented by a leftward shift of the aggregate demand curve.

Question 9

As higher is the MPS&#10;A)lower is the multiplier.&#10;B)higher is the investment spending&#10;C)higher is the equilibrium income.&#10;D)all the answers are right&#10;

Accepted Answer

The multiplier is inversely related to the Marginal Propensity to Save (MPS); thus, as MPS increases, the multiplier decreases.

Question 10

To increase the money supply, the bank central could:&#10;A)cut taxes&#10;B)purchase bonds in the open-market&#10;C)encourage people to held more cash (currency in circulation)&#10;D)increase the government spending

Accepted Answer

Purchasing bonds in the open market increases the money supply by injecting more money into the banking system, allowing banks to lend more.

Question 11

The variable that connect the market of money and the market of goods via investment spending is:&#10;A)the mpc&#10;B)the interest rate&#10;C)the mps&#10;D)the cpi

Accepted Answer

The answer of The variable that connect the market of...

Question 12

Point out the monetary policy instrument:&#10;A)an increase in direct taxes&#10;B)open-market operations&#10;C)freezing pensions&#10;D)a cut in government purchase of goods and services

Accepted Answer

The answer of Point out the monetary policy instrument:&#10;A)an increase...

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:&#10;A)central bank (rbi)&#10;B)sbi&#10;C)iba&#10;D)none of these

Accepted Answer

The answer of Monetary Policy is a regulatory policy by...

Question 14

-------controls the supply of money and bank credit:&#10;A)rbi&#10;B)indian banking association&#10;C)sebi&#10;D)none of these

Accepted Answer

The answer of -------controls the supply of money and bank...

Question 15

The main objective of monetary policy in India is-------:&#10;A)growth with stability&#10;B)reduce poverty and achieve stability&#10;C)overall monetary stability&#10;D)none of these

Accepted Answer

The answer of The main objective of monetary policy in...

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:&#10;A)public bank&#10;B)commercial bank&#10;C)industrial and agricultural banks&#10;D)none of these

Accepted Answer

The answer of The Cash Reserve Ratio is an effective...

Question 17

If RBI wants to increase the credit flow it buys -------:&#10;A)government securities&#10;B)shares and debentures&#10;C)other local and short-term securities&#10;D)none of these

Accepted Answer

The answer of If RBI wants to increase the credit...

Question 18

Trade between two countries is called&#10;A)Internal trade&#10;B)Intra-Country trade&#10;C)Intra-State Trade&#10;D)International Trade

Accepted Answer

The answer of Trade between two countries is called&#10;A)Internal trade&#10;B)Intra-Country...

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