ECO 007: Economic Development

QUIZ
#3
qui

Name: _______________________________________________ Permit number: _______

Section: ____________Schedule:_________________________ Date:________________

Quiz #3

Part 1. TRUE OR FALSE

Direction: SHADE LETTER A if your answer is TRUE, and LETTER B if your answer is FALSE. Cheating
is strictly prohibited.

1. Inflation is a change in the prices level.

2. Demand-pull inflation rises when import exceeds export.
3. Policy makers do not aim for zero % inflation.
4. Cost-push inflation is due to too much money chasing too few goods.
5. When the average price level is falling, this means that the rate of inflation is decreasing.
6. Attempts to cut unemployment lower than the natural rate will result into higher inflation.
7. Cost push inflation takes place when a rise in raw material costs occurs.
8. The condition of a continually rising price level is defined as inflation.
9. In Running Inflation price rise is between 2 to 10 % per annum.
10. When prices rise rapidly at a rate of 10 to 20 % per annum, it is called Running Inflation.
11. If inflation is anticipated, it costs less to society than if unanticipated
12. If the inflation rate is anticipated, inflation may not be a major problem
13. Inflation is the condition of a continually rising price level
14. Inflation benefits people lend at fixed interest rates
15. The price index for the current year is 180. This means, on the average, prices in the current year are
80% of prices in the base year.
16. Monetary policy refers to the actions undertaken by nation’s central bank to control money supply to
achieve macroeconomic goals that promote sustainable economic growth
17. For a given nominal interest rate, the more numerous the compounding periods, the less the effective
annual interest rate.
18. Carrying a balance on your credit card boosts your credit score.
19. John Maynard Keynes is a Founder of Fiscal Policy.
20. If money has a time value, then the future value will always be more than the original amount invested.

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 ECO 007: Economic Development
QUIZ
#3
qui

Name: _______________________________________________ Permit number: _______

Section: ____________Schedule:_________________________ Date:________________

Part 2. MULTIPLE CHOICE

Direction: Shade the letter of your answer in the answer sheet provided. Use black or blue ink ball
pen and strictly no erasures.

21. When the supply for money increases and the demand for money reduces, there will be?
a. A fall in the level of prices
b. A decrease in the rate of interest
c. An increase in the rate of interest
d. A fall in the level of demand

22. If the interest rate decrease in an economy, it will?

a. Decrease in the investment expenditure in the economy
b. Increase 5the loan repayment by the government
c. Increase the consumption expenditure in the economy
d. Increase the total savings in the economy

23. Money loses its value when it

a. Becomes too plentiful
b. Becomes too portable
c. Is divisible
d. Is durable

24. A plan to increase the amount of money in circulation

a. Open market operations
b. Expansionary policy
c. Contractionary policy
d. Monetarism

25. Which of the following is not a goal of fiscal and monetary policy?
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 ECO 007: Economic Development
QUIZ
#3
qui

Name: _______________________________________________ Permit number: _______

Section: ____________Schedule:_________________________ Date:________________

a. Full employment
b. Investment in human capital
c. Economic growth
d. Price stability

26. When interest rates rise, the number of loans made by banks will
a. Increase
b. unaffected
c. Decrease
d. Cannot be determined

27. Too much inflation in the economy is fixed by

a. Budget deficits
b. Loose monetary policy
c. Cannot be fixed
d. Tight money policy

28. This monetary policy tool is used to determine the amount of deposits that banks must hold is
__________.
a. Open market operations
b. Reserve requirement ratio
c. Discount rate
d. Federal funds rate

29. Which of the following is an expansionary open market operation?

a. Buying government bonds
b. Selling government bonds
c. Raising the discount rate
d. Lowering the discount rate

30. Which of the following is a contractionary open market operation?

a. Buying government bonds
b. Selling government bonds
c. Raising the discount rate
d. Lowering the discount rate