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.Management Sciences
Category: Fiscal And Monetary Policy
Fiscal drag occurs when ?
A. Tax bands do not increase with inflation
B. Tax rates move inversely with inflation
C. Government spending falls to reduce aggregate demand
D. Tax banks increase with inflation
The idea that the money supply should change to accommodate changes in aggregate demand is associated with the idea of ?
A. Margaret Thatcher
B. Ronald Reagan
C. Milton Friedman
D. John Maynard Keynes
The multiple by which total deposits can increase for every pound increase in reserves is the ?
A. Money multiplier
B. liquidity ratio
C. bank’s line of credit
D. required reserve ratio
Over-funding is when the State Bank of Pakistan ?
A. sells less government bonds than are required to finance the PSBR
B. sells more government bonds than are required to finance the PSBR
C. sells government securities on the open market
D. buys government securities on the open market
If the economy grows the government’s budget position will automatically ?
A. worsen
B. Improve
C. Stay the same
D. Increase with inflation
The response lag of stabilization policy represents ?
A. the time that it takes for policy makers to recognize the existence of boom of bust
B. the time needed for parliament to agree to a tax cut.
C. the time that is necessary to put the desired policy into effect
D. the time that it takes for the economy to adjust to the new conditions after a new policy has been implemented
In a regressive tax system ?
A. The amount of tax paid increase with income
B. The marginal rate of tax decrease with more income
C. The average rate of tax falls as income increase
D. The average rate of tax is constant as income increases
The budget deficit tends to decrease then ?
A. GDP decrease rapidly
B. GDP remains unchanged
C. GDP decrease slightly
D. GDP increase
Time lags which often erode effectiveness of monetary and fiscal policy measures represent ?
A. delays in the response of the economy is stabilization policy
B. the foreign response to price changes
C. the change in exports and imports prices
D. the change in exchange rates
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