If The Central bank tries to keep the interest rate constant when the economy is operating on the steep part of the AS curve, _________ will occur?

Related Mcqs:

1. For the Central bank to keep the interest rat unchanged as the government increase spending, the Central Bank must continue to ?

   A. decrease the money supply
   B. increase the money supply
   C. increase the demand for money
   D. decrease the demand for money

2. Reserve requirements that may be imposed on an economy’s banks by its central bank specify that banks by its central bank specify that banks reserve must be a minimum percentage of them ?

   A. assets
   B. deposits
   C. loans
   D. government bonds

3. Keynesians and monetarists differ over how steep the IS and LM curves actually are Monetarists claim that the IS curve must be __________ and the LM curve must be __________?

   A. flat; steep
   B. flat; flat
   C. steep; flat
   D. steep; steep

4. For the United States suppose the annual interest rate on government securities equals 8 percent while the annual inflation rate equals 4 percent, For Switzerland the annual interest rate on government securities equal 10 percent while the annual inflation rate equals 7 percent the above variables would cause investment funds to flow from ?

   A. the United States to Switzerland causing the dollar to depreciate
   B. the United States to Switzerland causing the dollar to appreciate
   C. Switzerland to the United States causing the franc to depreciate
   D. Switzerland to the United States causing the franc to appreciate

5. For the United States suppose the annual interest rate on government securities equals 12 percent while the annual inflation rate equals 8 percent For Japan the annual interest rate on government securities equals 10 percent while the annual inflation rate equals 5 percent the above variables would cause investment funds to flow from ?

   A. The United States to Japan causing the dollar to depreciate
   B. The United States to Japan causing the dollar to appreciate
   C. The Japan to United States, causing the dollar to depreciate
   D. The Japan to United States, causing the dollar to appreciate

6. Refers to Exhibit 4. Suppose the economy is operating in a recession such as point B in Exhibit 4. If policy makers allow the economy to adjust to the long run natural rate on its own, ?

   A. People will reduce their price expectations and the short run aggregate supply will shift right
   B. People will raise their price expectations and aggregate demand will shift left
   C. People will raise their price expectations and the short run aggregate supply will shift left
   D. People will reduce their price expectations and aggregate demand will shift right

7. Suppose the State Bank purchases a Rs 1,000 government bond from you. If you deposit the entire Rs 1,000 in you bank what is the total potential change in the money supply as a result of the State Bank’s action if the your bank’s reserve ratio is 20 percent ?

   A. Rs 4,000
   B. Rs 5,000
   C. Rs 1,000
   D. Rs 0

8. If the nominal interest rate is 7 percent and the inflation rate is 3 percent, then the real interest rate is ?

   A. 4 percent
   B. 10 percent
   C. -4 percent
   D. 3 percent
   E. 21 percent

9. Refer to Exhibit 6.If People in the economy expect inflation to be 6 percent but inflation turn out to be 3 percent the economy is operating at point ?

   A. H
   B. c
   C. d
   D. F

10. Refer to Exhibit 6. Suppose the economy is Operating in long-run equilibrium at point E. An unexpected monetary contraction will move the economy in the direction of point ?

    A. H
    B. F
    C. E
    D. c