| Q.1 |
Please write the alphabate of selected choice
in the answer column: (16) |
i |
Demand deposits are money because they are
A) considered legal tender
B) considered fiat money.
C) considered token money D)
considered a medium of exchange.
E) none of the above |
ii |
According to equation of exchange, if V is kept as constant,
an increase in M leads to an increase in
A) demand for money B)
real GDP C)
nominal GDP
D) interest rate E)
none of the above |
iii |
An increase in interest rates causes
A) a rise in the value of an asset generating
income stream
B) a rise in coupon payments
C) a reduction in coupon payments
D) a reduction in the price of an asset generating
fixed income
E) none of the above |
iv |
As price level decelerates,
A) the demand for money reduces
B) the investment level reduces
C) the interest rates increases
D) both the demand for money and interest
rates increases
E) none of the above
|
v |
An appreciation of Pak rupee against a basket of currencies indicates
that
A) SBP should pursue an expansionary
monetary policy stance
B) SBP should pursue a contractionary
monetary policy stance
C) more foreign investment should
come into Pakistan
D) Pakistani exports should be discouraged
E) none of the above
|
vi |
A recessionary gap in Pakistan can be counteracted
A) by raising of the SBP discount rate
B) by contraction of money supply (M2)
C) by selling of Pakistan Investment Bonds
(PIBs) by SBP
D) by pursuing an expansionary monetary
policy stance by SBP
E) none of the above |
vii |
Cost-push inflation is the outcome of
A) an increase in output and high employment
level
B) an increase in cost of production
C) a reduction in input prices
D) an excessive growth in money supply
(M2)
E) none of the above |
viii |
If SBP responds to repeated negative supply shocks,
A) the Pak economy is likely to
face an undesirable state of stagflation.
B) the Pak economy is likely to
face deflation.
C) the Pak economy may face recession
in future.
D) the Pak economy may face a
continuous rise in price inflation.
E) none of the above |
ix |
Monetary contraction ----------- domestic interest rates and
leads to capital --------, which results into ------------ of Pak
rupee.
A) increases, inflows, an appreciation B)
decreases, inflows, a depreciation
C) increases, outflows, as appreciation D)
increases, outflows, a depreciation
|
x |
Under its current monetary policy framework, the SBP is primarily
responsible to --------------------------.
A) issue currency notes and coins
B) control money supply (M2) with focus
on short-term interest rates.
C) supervise scheduled banks
D) lend funds to scheduled banks against
T-bills/PIBs.
|
xi |
Equation of exchange is equal to --------------------------------------.
A) MV = PQ B)
PQ + M = V
C) GNP = V + M/PQ
D) GNP = V + P+ M.
|
xii |
According to monetarists rule, the rate of increase in money
supply should be equal to the rate of increase in ----------------------------------------
of an economy.
A) price level
B) interest rates
C) potential GPD level D)
foreign exchange reserves |
xiii |
Demand-pull inflation below the potential of economy leads to
------------ and--------------------.
A) an increase in both
the real GDP growth, employment level
B) a decline in both the
real GDP growth, employment level
C) a rise in prices, decline
in employment level
D) a fall in prices, rise
in employment level
|
xiv |
Monetary expansion results into an increase in aggregate demand
if---------------------- and --------------.
A) the money demand, investment demand
curves are inelastic
B) the money demand, investment demand curves
are elastic
C) money demand curve is elastic, investment
demand curve is inelastic
D) the money demand curve is inelastic,
investment demand curve is elastic |
xv |
Liquidity risks relates to inability of a bank to meet its-----------------------------.
A) short-term liquidity demands B)
medium-term liquidity demands
C) long-term liquidity demands D)
long-term foreign exchange demands |
xvi |
The shocks like earthquakes and floods may result into -------------
in the short-run.
A) demand shocks and price acceleration B)
supply shocks and price deceleration
C) demand shocks and price deceleration D)
supply shocks and price acceleration |
| Q.2 |
State True or False in the answer column. Give
brief reason for your selection at the space provided below the question:
(08) |
i |
The most important function of money is to serve as a medium of
exchange. |
ii |
Monetary policy impacts price level in the long-run. |
iii |
In reality, the actual GDP of an economy can be higher than the
potential GDP. |
iv |
In a risk-based capital system, the Tier-III capital is limited
to 100 percent of core capital only. |
v |
As real GDP increases, the desired level of money holdings expands.
|
vi |
Currently the monetary policy stance of SBP is transmitted through
its bi-annual Monetary Policy Statements. |
vii |
Inflation targeting strategy of monetary policy is also considered
an automatic stabilizer of an economy. |
viii |
The ultimate objective of an easy monetary policy is depicted by
a reduction in interest rates. |
| Q.4 |
Small Cases (20) |
A |
A central bank intends to control future inflation.
If the central bank is operating under monetary aggregates targeting
regime, what policy stance you recommend the central bank to pursue
mainly to contain price hikes? |
B |
A central bank may pursue a contractionary
or an expansionary monetary policy stance to achieve its targets.
Being an analyst, how would you define a contractionary policy stance
of the central bank if the policy stance does not result into a
reduction in money supply (M2)? |
C |
The global imbalances are widening rapidly.
The disorderly unwinding of global imbalances may cause undesirable
moments in exchange rates, reversal of capital flows, and shaking
the confidence of investors, which could affect severely the growth
prospects of economies like Pakistan. You are required to suggest
policymakers some strategies helpful in minimizing the impact of
disorderly unwinding of global imbalances. |
D |
Excessive credit extension is said to be one
of the leading indicators of banking crisis as it may lead to deterioration
in the quality of banks portfolios and worsens the balance sheets
of banks. You are required to suggest the policymakers some suitable
policy measures mainly to minimize the adverse implications of excessive
credit episodes. |