Question

1) of the Central Bank of Kuwait puts in place an expansionary monetary policy, its decision is based on A) the fact that the economy is at ful employment B) Expectation of excessive inflation in the future C) the fact that the economy is in an expansion D) Unemployment level is high 2) When the interest rate is set at a very low rate A) the opportunity cost of holding money is very low B) the money demand will shift to the right demand for money increases D) the money demand will shift to the left 3) Money supply and the interest rate are A) positively related B) the targets of the Central Bank C) the goals of fiscal policy D) the goals of the Central Bank 4) When aggregate expenditure is less than real GDP, then A) inventories decrease, signaling firms to increase production and increase real GDP B) profits fall, signaling firms to decrease production and decrease real GDP. C) inventories increase, signaling firms to decrease production and decrease real GDP. D) None of the above answers are correct. 5) If consumption increases by $200 and, in response, equilibrium agregate expenditure increases by $600, the multiplier is A) 5 B)0.5. C)2 D0.3. 6) When the GDP in Kuwait rises relative to the GDP in other countries. will fall and will A exports; imports B) exports, net exports C) imports; net exports D) net exports; imports 7) An increase in the price level will A) shift the aggregate demand curve to the left B) shift the aggregate demand curve to the right. C) move the economy up along the aggregate demand curve D) move the economy down along the aggregate demand curve. 8) Expansionary monetary policy involves A) reducing money supply and lowering taxes B) increasing money supply to decrease interest rate C) increasing government spending and cutting money supply D) increasing the interest rate and increasing taxes 9) Long-run macroeconomic equilibrium occurs when A) aggregate demand equals short run aggregate supply. B) structural and frictional unemployment equals zero Coutput is at potential GDP D) aggregate demand equals short-run aggregate supply and they intersect at a point on the long run supply curve 10) of the economy is growing beyond potential real GDP, which of the following would be an appropriate monetary policy to bring the economy back to long-run aggregate supply? A decrease in A) oil prices B) discount rate the money supply and a decrease in interest rates. D) taxes

Answer 1

Answer 1:

Option D. When there is recession in the economy and unemployment rate in the economy is high, then the Central Bank of Kuwait will follow expansionary monetary policy because this will increase aggregate demand and help in reduction of unemployment in the economy.

Answer 2:

Option A. When interest rate is set at avery low rate, then opportunity cost of holding money which is interest rate is very low.

Answer 3:

Option B. Monry Supply and Interest rate are the targets of the Central Bank.

Answer 4:

Option C. When aggregate expenditure in the economy is less than Real GDP, then inventories increase which will signal firms to decrease production and this will decrease Real GDP in the economy.