Air University 

Pakistan Economy (BSAF7)

Total Marks 20 Time Allowed: 30 Minutes 
Section I
Encircle the correct answer:

1. Whenever, the supply of money and credit exceedingly increase, the purchasing
power of money will: (a) Also increase (b) Remain Constant (c) Decrease (d)
Becomes zero
2. During deflation, central bank has to follow an easy monetary policy for sake of:
(a Removal of deflation) (b) Survival of deflation (c) Removal of inflation (d) Survival
on inflation
3. The most important function of the central bank is to bring economic stabilization,
for this it uses all the instruments of: (a) Money policy (b) Fiscal policy (c) Monetary
policy (d) Budgetary policy
4. The policy which is adopted by the central bank of a country to control supply of
money and credit is known as: (a) Fiscal Policy (b) Monetary Policy (c) Inflationary
Policy (d) Deflationary Policy
5. The rate of interest at which central bank advances loans to commercial banks or
rediscounts the bill of exchange is known as: (a) Bank Rate (b) Discount Rate (c)
both a & b (d) none of these
6. The biggest advantage of discount policy of commercial bank is this that it serves
as a last resort of the : (a) Government (b) Customers (c) Commercial banks (d) All
of these
7. During the period of inflation or credit bonanza, central bank: (a) Sell Govt.
Securities (b) Buy Govt. Securities (c) Holds govt. securities (d) Pays govt. securities
8. The instruments of monetary policy: (a) Open Market Operation (b) Changes in
discount rate (c) Change in reserve ratio (d) All of these
9. The Biggest advantages of change in reserve requirement is, that due to this policy
all the banks are affected: (a) Equally (b) not equally (c) Proportionally (d)
Occasionally
10. While advancing loans, the commercial banks ask of mortgage known as: (a)
Average requirements (b) Marginal requirements (c) Daily requirements (d) Total
requirement
11. It is the problem of each central bank that it wants to attain certain economic
objectives like higher level of employment with: (a) Price stability (b) wages stability
(c) income stability (d) product stability
12. Monetary policy consist of all those measures which are adopted by central bank
of a country to control the supply of money and: (a) Prices (b) Demand of money (c)
Credit (d) Services
13. Monetary Policy was considered a source of: (a) Economic Development (b)
Attaining full employment (c) a means to remove deficit in BOP (d) All of these
14. The rising price creates the incentives amongst factors of: (a) Saving (b)
Consumption (c) Production (d) Investment
15. The falling price discourage the: (a) Hoarding (b) Speculation (c) Black marketing
(d) All of these
16. The BOP of a country will improve during fallings prices, because falling prices:
(a) Encourage exports (b) discourage imports (c) both a & b (d) none of these
17. In case of UDCs, the capital and money markets are very: (a) Mature (b)
Immature (c) Active (d) dormant
18. Discounted bonds are purchased at the value: (a) Less than their face value (b)
More than their face value (c) Equal than their face value (d) None of these
19. Whenever rate of interest increases, the price of bonds: (a) Also increase (b)
decrease (c) remain constant (d) become zero
20. Because of tight monetary policy, the supply of money will decrease lending to:
(a) Increase the interest rate (b) decrease the interest rate (c) stable interest rate
(d) speculate the interest rate

Mark as done