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IAI March 2017 MCQ's

P

Priyanshi Bhansali

Member
What will be the possible answers to these questions:

(Question 20): Which of the following could explain why a country’s aggregate demand curve might shift inwards to the left?
A. An appreciation of the domestic currency
B. A decrease in interest rates
C. A rise in Government expenditure
D. An increase in business confidence

(Question 22): The monetary base is increased when?
A. The central bank prints more money.
B. The Government buys Treasury bills from the public.
C. A citizen buys a newly issued corporate bond.
D. A firm obtains an overdraft from a bank.
(For Ques 22, Are A and B both possible?)
 
Priyanshi Bhansali said:
What will be the possible answers to these questions:

(Question 20): Which of the following could explain why a country’s aggregate demand curve might shift inwards to the left?
A. An appreciation of the domestic currency
B. A decrease in interest rates
C. A rise in Government expenditure
D. An increase in business confidence

(Question 22): The monetary base is increased when?
A. The central bank prints more money.
B. The Government buys Treasury bills from the public.
C. A citizen buys a newly issued corporate bond.
D. A firm obtains an overdraft from a bank.
(For Ques 22, Are A and B both possible?)
Click to expand...

Q20: A - because, for example, an appreciation of the domestic currency will increase the foreign price of the country's exports. This should lead to a decrease in demand for these goods and hence export earnings and hence a decrease in aggregate demand

Q22:
The monetary base is defined in CT7 as the cash (notes and coins) in circulation outside the central bank.

So I'd say the answer is B - the money that the government uses to buy T-Bills from the public will increase the monetary base.

Printing of more money by the central bank could increase the notes and coins in circulation in future, but only if / when the government / central bank releases that money into the economy. So, I would say A isn't the answer.

Hope that helps?

Gresham
 
Hi
So IAI released the mark scheme today and I am not able to understand the reasoning behind 2 of their solutions.

Q25- the solution says option B is correct but I think it's option D.
Q26- I am not getting option A by any calculations.

Also Q35 part 2nd and 3rd
I am not able to arrive at these figures

Can anyone please explain?
 
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