KINDLY REFER TO CHAPTER 6 OF THE COMPREHENSIVE VIDEO LECTURES AND READ THE TOPICS BELOW BEFORE YOU ATTEMPT THE QUESTIONS THAT FOLLOW. CIS ECONS LEVEL 2 WEEK 12 QUESTIONS TOPIC: ECONOMIC POLICIES OBJECTIVE QUESTIONS 1. A combination of measures designed to control money supply and credit availability in the economy to achieve macroeconomic objectives is called... 2. The control of a country s money supply and monetary policy is the primary responsibility of the A. Ministry of Finance B. Commercial Banks C. Development Banks STARRY GOLD ACADEMY +2348023428420, +2347038174484, info@starrygoldacademy.com, www.starrygoldacademy.com Page 1
D. Monetary Policy Committee E. Central Bank 3. The two fiscal instruments as used by government are (a) Revenue and expenditure (b) Cost and benefits (c) Price and income (d) Expenditure and taxation. 4. The locus of combination of income level and interest rate that yields equilibrium in the goods market is called 5. The locus of combination of income level and interest rate that yields equilibrium in the money or financial market is called STARRY GOLD ACADEMY +2348023428420, +2347038174484, info@starrygoldacademy.com, www.starrygoldacademy.com Page 2
6. In a closed economy, which of these is the most likely immediate effect of monetary expansion: A. A rightward shift of the L-M curve B. A leftward shift of the I-S curve C. A rightward shift of the I-S curve D. A leftward shift of the L-M curve 7. Deficit spending by the government is best described as: A. Expansionary fiscal policy. B. Expansionary monetary policy. C. Contractionary fiscal policy. D. Contractionary monetary policy. 8. The policy of intervening in the exchange market to offset temporary fluctuations in the exchange rate is referred to as: A. Flexible exchange rate system. B. Fixed exchange rate system. STARRY GOLD ACADEMY +2348023428420, +2347038174484, info@starrygoldacademy.com, www.starrygoldacademy.com Page 3
C. Arbitrated float. D. Managed or dirty float. 9. shows the combination of interest rate and income levels where saving investment equality takes place so that product market of the economy is in equilibrium the (A) IS schedule (B) LM Schedule (C) IS LM Schedule. 10. The slope of the I S curve is in nature (A) Upward STARRY GOLD ACADEMY +2348023428420, +2347038174484, info@starrygoldacademy.com, www.starrygoldacademy.com Page 4
(B) Downward (C) Increasing (D) Decreasing 11. curve shows the various combinations of interest rate and levels of income at which the demand and supply of money are equal (A) IS (B) LM (C) IS LM (D) IM LM. STARRY GOLD ACADEMY +2348023428420, +2347038174484, info@starrygoldacademy.com, www.starrygoldacademy.com Page 5
12. The policy tool used by product market to achieve equilibrium is called. (A) Monetary policy (B) Fiscal policy (C) Monetary - Fiscal Policy (D) Policy Mix 13. The policy tool used by money market to achieve equilibrium is called (A) Monetary policy (B) Fiscal policy (C) Monetary Fiscal policy STARRY GOLD ACADEMY +2348023428420, +2347038174484, info@starrygoldacademy.com, www.starrygoldacademy.com Page 6
(D) Policy Mix. 14. An expansionary monetary policy means that the LM curve shifts to the (A) Left (B) Right (C) Centre (D) Middle 15. A contractionary monetary policy implies that the LM curve shift to the (A) Left STARRY GOLD ACADEMY +2348023428420, +2347038174484, info@starrygoldacademy.com, www.starrygoldacademy.com Page 7
(B) Right (C) Centre (D) Middle 16. An expansionary fiscal policy means that the I S curve shifts (A) Upward (B) Downward (C) Centre (D) Middle STARRY GOLD ACADEMY +2348023428420, +2347038174484, info@starrygoldacademy.com, www.starrygoldacademy.com Page 8
17. The control measure by CBN to give a form of gentle appeal to the commercial banks as to the kind of lending policy then should be adopt is called (a) Bank rate (b) Special deposit (c) Special directive (d) Moral suasion 18. The IS-LM diagram details the simultaneous determination of equilibrium values of the interest rate and the level of national income as a result of conditions in the: A. Money and capital markets. B. Goods and bond markets. C. Security and financial markets. STARRY GOLD ACADEMY +2348023428420, +2347038174484, info@starrygoldacademy.com, www.starrygoldacademy.com Page 9
D. Goods and money markets 19. The use of government spending and taxes to affect aggregate demand and aggregate supply is called: A. Monetary policy. B. Fiscal policy. C. Expenditures policy. D. Aggregate expenditure 20. The simultaneous use of economic policies to achieve simultaneous equilibrium in national income and interest rate is A. fiscal policy B. monetary policy C. policy mix D. commercial policy 21. The IS-LM model is a theoretical construct that integrates: A. Labour market and money market. STARRY GOLD ACADEMY +2348023428420, +2347038174484, info@starrygoldacademy.com, www.starrygoldacademy.com Page 10
B. Labour market and bond market. C. Commodity market and bond market. D. Commodity market and money market. 22. The imposition of high income tax by government to cut down demand is known as A) Monetary policy B) Budgetary policy C Fiscal policy D) Internal policy E) Development policy. 23. An expansionary monetary policy can: STARRY GOLD ACADEMY +2348023428420, +2347038174484, info@starrygoldacademy.com, www.starrygoldacademy.com Page 11
A. Cause the rate of interest to rise. B. Raise the level of household wealth. C. Lower the cost of borrowing. D. Decrease consumption of durable goods. THEORY 1. What do you understand by the term- Economic policy? 2. Itemize the major policies commonly adopted by government to achieve broad macroeconomic goals and objectives in economic literatures 3. What is fiscal policy? Enumerate its basic objectives 4. What is monetary policy? Enumerate its basic objectives. 5. Distinguish clearly between fiscal policy and economic policy. 6. What do you understand by policy mix? STARRY GOLD ACADEMY +2348023428420, +2347038174484, info@starrygoldacademy.com, www.starrygoldacademy.com Page 12
STARRY GOLD ACADEMY +2348023428420, +2347038174484, info@starrygoldacademy.com, www.starrygoldacademy.com Page 13