58) When a central bank follows a Taylor-rule in the conduct of its monetary policy, then it (A)_ interest rates when the output gap and the (B) __ both fall.

(A) lowers (B) underlying trend rate of potential GDP growth

(A) lowers (B) difference between the actual inflation rate and the bank’s target inflation rate.

(A) raises (B) underlying trend rate of potential GDP growth.

(A) raises (B) difference between the actual inflation rate and the bank’s target inflation rate.

Answer is:

(A) lowers (B) difference between the actual inflation rate and the bank’s target inflation rate.

Macro Economics MCQ (GK Set-1) with Answers

For more MCQ's Click Here

Related Macro Economics MCQ (GK Set-1) with Answers

59) The policy dilemma faced by central banks confronted with the need to play the role of lender-of-last resort is:

The possibility of running out of bank reserves so that the central bank itself becomes insolvent.

Bankers will reduce their reserves if the risk of a run on the bank has been reduced by the central bank’s policy to serve as lender-of-last-resort

The central bank will begin to compete with private banks in lending to households and businesses

The provision of banks with liquidity that can be relied on in a time of crisis creates an incentive for banks to take on excessive risk in their investment strategies, making even greater future demands on the lender-of-last resort more likely than before

Answer is:

The provision of banks with liquidity that can be relied on in a time of crisis creates an incentive for banks to take on excessive risk in their investment strategies, making even greater future demands on the lender-of-last resort more likely than before

60) Assuming that both the price level and the interest rate are constant, if output were equal to Y

there is an excess supply of goods equal to YY

desired demand (YC) is lower than output (YB) and inventories of unsold goods will accumulate.

desired demand (DD) will shift vertically upward to pass through point B for goods market equilibrium

The government budget will be in surplus and equal to BC

Answer is:

desired demand (YC) is lower than output (YB) and inventories of unsold goods will accumulate.

61) Assuming both the price level and the interest rate are constant and government spending increases from G to G, the government spending multiplier is equal to

Answer is:

the difference (Y-Y) divided by the difference (G- G).

62) The Taylor rule shows combinations of (A) and (B) which characterize (C) _ of the central bank.

Answer is:

(A) real GDP; (B) interest rates; (C) the monetary policy

Macro Economics MCQ (GK Set-1) with Answers

For more MCQ's Click Here

58) When a central bank follows a Taylor-rule in the conduct of its monetary policy, then it (A)_______ interest rates when the output gap and the (B) ________ both fall.

(A) lowers (B) difference between the actual inflation rate and the bank’s target inflation rate.

Macro Economics MCQ (GK Set-1) with Answers

Related Macro Economics MCQ (GK Set-1) with Answers

59) The policy dilemma faced by central banks confronted with the need to play the role of lender-of-last resort is:

The provision of banks with liquidity that can be relied on in a time of crisis creates an incentive for banks to take on excessive risk in their investment strategies, making even greater future demands on the lender-of-last resort more likely than before

60) Assuming that both the price level and the interest rate are constant, if output were equal to Y

desired demand (YC) is lower than output (YB) and inventories of unsold goods will accumulate.

61) Assuming both the price level and the interest rate are constant and government spending increases from G to G, the government spending multiplier is equal to

the difference (Y-Y) divided by the difference (G- G).

62) The Taylor rule shows combinations of (A) ____ and (B) ____ which characterize (C) _____ of the central bank.

(A) real GDP; (B) interest rates; (C) the monetary policy

Macro Economics MCQ (GK Set-1) with Answers

58) When a central bank follows a Taylor-rule in the conduct of its monetary policy, then it (A)_ interest rates when the output gap and the (B) __ both fall.

62) The Taylor rule shows combinations of (A) and (B) which characterize (C) _ of the central bank.