Free Macroeconomics MCQs with Answers
1,499 Macroeconomics MCQs from Economics, each with the correct answer and a written explanation of why it is correct. Free and unlimited, with no account needed.
The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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1,499 questions · page 47 of 75
- A. increase the money supply because it is now cheaper for banks to borrow from the central bank
- B. decrease the money supply because it will now be more expensive for business firms and consumers to borrow money
- C. Not change the money supply because banks already have excess reserves they cannot lend
- D. Decrease the money supply because it is now cheaper for banks to borrow from the central bank instead instead of buying government securities
Explanation: With excess reserves already available and no willingness by firms or consumers to borrow, cheaper central-bank credit does not create…
Correct answer: Not change the money supply because banks already have excess reserves they cannot lend- A. Assisting Banks that are in a difficult financial position
- B. Auditing the various agencies and department of the government
- C. Loaning money to other countries that are friendly to the UK.
- D. Issuing new bonds to finance the PSBR.
Explanation: A central bank can support banks facing financial difficulty, acting as lender of last resort to protect the banking system.
Correct answer: Assisting Banks that are in a difficult financial position- A. savings accounts
- B. Travelers checks
- C. Currency held outside banks
- D. Automatic-transfer savings accounts
Explanation: Savings accounts are generally included in broad money, such as M2, but not narrow money, such as M1.
Correct answer: savings accounts- A. precious metals
- B. commodity money
- C. fiat money
- D. barter items
Explanation: Fiat money has little or no intrinsic value as a commodity, but it is accepted because the government declares it legal tender and users…
Correct answer: fiat money- A. bills of exchanges
- B. government bonds
- C. Treasury bills
- D. Capital bills
Explanation: Government securities with maturities exceeding one year are generally called government bonds.
Correct answer: government bonds- A. The banks will increase their lending
- B. The short-term interest rate at which the economy's commercial banks lend to and borrow from each other will fall and the central bank may be expected to reduce the supply of liquidity to the banks
- C. The short-term interest rate at which the economy's commercial banks lend to and borrow from each other will rise and the long-term interest rate may be expected to rise as a result
- D. the long-term interest rate in the economy will rise and the central bank will raise its interest rate in response
- E. The short-term interest rate at which the economy's commercial banks lend to and borrow from each other will rise and the central bank may be expected to increase the supply of liquidity to the banks.
Explanation: A shortage of liquidity makes banks compete for funds, pushing up the short-term interbank interest rate.
Correct answer: The short-term interest rate at which the economy's commercial banks lend to and borrow from each other will rise and the central bank may be expected to increase the supply of liquidity to the banks.- A. fiat, commodity and deposit money
- B. Open-market operations reserve requirements and the refinancing rate
- C. The money supply, government purchases and taxation
- D. Government expenditures taxation and reserve requirements
- E. Coin, currency and demand deposits
Explanation: The standard monetary-policy instruments are open-market operations, reserve requirements, and the central bank's policy or refinancing…
Correct answer: Open-market operations reserve requirements and the refinancing rate- A. Rs 4,000
- B. Rs 5,000
- C. Rs 1,000
- D. Rs 0
Explanation: With a 20 percent reserve ratio, the simple deposit multiplier is 1/0.20 = 5.
Correct answer: Rs 5,000929. Which of the following policy actions by a central bank is likely to increase the money supply ?
- A. Increasing the refinancing rate
- B. All of these will increase the money supply
- C. Buying government bonds in open market operations
- D. Increasing reserve requirements
Explanation: Buying government bonds injects reserves into the banking system, enabling banks to create more deposits and loans.
Correct answer: Buying government bonds in open market operations- A. Rs 10,00
- B. Rs 1,000
- C. Rs 9,000
- D. Rs 0
Explanation: Moving an existing Rs1,000 deposit from one bank to another changes the location of the deposit, not the total amount of deposits in the…
Correct answer: Rs 0- A. Money supply will increase because Banca Solida will increase its loans
- B. The effect on money supply cannot be determined from the information given
- C. Money supply will decrease because the loans will have to be repaid
- D. Money supply will be unchanged because the central bank has made no policy changes
Explanation: Reducing the reserve ratio from 25 percent to 12.5 percent permits the bank to lend a larger fraction of its deposits, increasing the…
Correct answer: Money supply will increase because Banca Solida will increase its loans932. Commodity money ?
- A. has no intrinsic value
- B. has intrinsic value
- C. is used exclusively in the economies of western Europe and north America
- D. is used as reserves to back fiat money
Explanation: Commodity money is itself a valuable good, such as gold, silver, or cattle, so it has intrinsic or non-monetary value.
Correct answer: has intrinsic value- A. hedge against inflation
- B. Medium of exchange
- C. unit of account
- D. Store of value
Explanation: The standard functions of money are medium of exchange, unit of account, and store of value.
Correct answer: hedge against inflation- A. higher interest rates
- B. lower expected future profits
- C. more expensive capital goods
- D. All of the above
Explanation: Investment demand falls when borrowing costs rise, expected profits decline, or capital goods become more expensive.
Correct answer: All of the above- A. rise; increase, increase
- B. rise, falls, increase
- C. rise, increase, falls
- D. rise, falls, falls
Explanation: Higher interest rates can reduce the market value of interest-sensitive assets and household wealth, while also making borrowing more…
Correct answer: rise, falls, falls- A. a change in the real money supply
- B. a change in real income
- C. a change in competition in the banking industry
- D. any of the above
Explanation: Money-market equilibrium depends on both real money supply and money demand; real income shifts demand, while banking competition can…
Correct answer: any of the above- A. bank deposits, building society deposits
- B. Currency in circulation, banks cash reserves
- C. retail sight deposits building society deposits
- D. retail deposits, wholesale deposits
Explanation: The monetary base, or high-powered money, consists of currency held by the public plus commercial banks' reserves at the central bank.
Correct answer: Currency in circulation, banks cash reserves938. When real income increases other things equal we can expect the demand for real money holdings to ?
- A. fall
- B. not change
- C. increase
- D. None of these
Explanation: Higher real income increases the volume of transactions people undertake, so they generally want to hold more real balances for payments.
Correct answer: increase- A. bank opening hours, the proportion of weekly paid employee's interest rates
- B. the price level interest rates real income
- C. The time of year bank opening hours the price level
- D. The proportion of weekly paid employees the time of year real income
Explanation: Demand for money depends mainly on the price level, interest rates, and real income.
Correct answer: the price level interest rates real income- A. State Bank of Pakistan Issue Department
- B. Money + bank cards + credit cards
- C. Cheques + money + bank cards + credit cards
- D. Currency in circulation plus bank deposits
Explanation: The money supply includes currency held by the public plus bank deposits, especially demand deposits used for payments.
Correct answer: Currency in circulation plus bank deposits