Macro Economics MCQ (GK Set-1) with Answers

56) Considering the money market in isolation, if real GDP increases in the short-run, then the equilibrium nominal interest rate will (A) _ should the money stock be (B)_____ by the central bank

Answer is:

(A) rise; (B) held constant

57) The monetary base is:

Answer is:

The sum of currency in circulation and commercial bank reserves

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.

Answer is:

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

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

Answer is:

56) Considering the money market in isolation, if real GDP increases in the short-run, then the equilibrium nominal interest rate will (A) _____ should the money stock be (B)_________ by the central bank

(A) rise; (B) held constant

57) The monetary base is:

The sum of currency in circulation and commercial bank reserves

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.

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.

56) Considering the money market in isolation, if real GDP increases in the short-run, then the equilibrium nominal interest rate will (A) _ should the money stock be (B)_____ by the central bank

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.