Economics - Economics Section 2

Avatto > > CFA Level 1 > > PRACTICE QUESTIONS > > Economics > > Economics Section 2

51. A contraction in the money supply would most likely:

  • Option : A
  • Explanation : Decreasing the supply of money, all other things being equal, will increase its “price”, that is, the interest rate on money balances.
Cancel reply

Your email address will not be published. Required fields are marked *


Cancel reply

Your email address will not be published. Required fields are marked *


52. As the gross domestic product (GDP) grows over time:

  • Option : C
  • Explanation : As the gross domestic product (GDP) grows over time, both transactions and precautionary money balances increase.
Cancel reply

Your email address will not be published. Required fields are marked *


Cancel reply

Your email address will not be published. Required fields are marked *


53. Which of the following is most likely correct about the quantity equation of exchange?

  • Option : A
  • Explanation : B is incorrect because the spending, P * Y, is approximately proportional to quantity of money, M. C is incorrect because if money neutrality holds, an increase in the money supply, M, does not affect Y, real output.
Cancel reply

Your email address will not be published. Required fields are marked *


Cancel reply

Your email address will not be published. Required fields are marked *


54. Due to high inflation, businesses constantly have to change the advertised prices of their goods and services. This is best described as:

  • Option : A
  • Explanation : The costs described are known as menu costs.
Cancel reply

Your email address will not be published. Required fields are marked *


Cancel reply

Your email address will not be published. Required fields are marked *


55. Unexpected inflation least likely:

  • Option : C
  • Explanation : Unexpected inflation reduces the information content of market prices.
Cancel reply

Your email address will not be published. Required fields are marked *


Cancel reply

Your email address will not be published. Required fields are marked *