Tax bracket creep occurs because tax codes:

• A) Do not adjust for inflation
• B) Eliminate inflationary effects
• C) Include automatic adjustment for inflation
• D) Are linked to government spending

Outright Open Market Operations (OMO) differ from repo-type Open Market Operations (OMO) because:

• A) Securities ownership is permanently transferred
• B) They carry no interest rate implications
• C) They are short-term only
• D) They do not involve government securities

Under statutory liquidity requirement (SLR), banks are required to invest in:

• A) Approved government securities
• B) International reserves
• C) Stock market securities
• D) Private sector corporate bonds

The term "menu costs" originates from which industry?

• A) Manufacturing
• B) Restaurant
• C) Education
• D) Banking

If the corporation begins to suffer significant losses, the demand for corporate bonds will:

• A) Fluctuates unpredictably
• B) Decrease
• C) Increase
• D) Remain constant

What is the effect of increased expected inflation on the demand for bonds?

• A) Demand becomes unpredictable
• B) Demand decreases
• C) Demand increases
• D) Demand remains constant

Why is a house considered a less liquid asset compared to stocks?

• A) It has no buyers in the market
• B) It cannot be converted into cash
• C) Its price fluctuates frequently
• D) It involves higher transaction costs and slower selling processes

The discount window refers to:

• A) Reduction of reserve requirements
• B) An interest rate corridor mechanism
• C) Government subsidies to households
• D) A facility where banks can borrow reserves from the central bank

What happens to the demand curve for bonds during a business cycle expansion?

• A) It shifts to the left
• B) It shifts to the right
• C) It remains unchanged
• D) It fluctuates randomly

What was the name of the temporary program introduced by the Federal Reserve in December 2007 to help banks borrow more money?

• A) Quantitative Easing
• B) Credit Easing Program
• C) Term Auction Facility
• D) Discount Lending Program

How is the GDP deflator calculated?

• A) Real GDP divided by the GDP growth rate
• B) Nominal GDP multiplied by Real GDP
• C) Nominal GDP divided by Real GDP and multiplied by 100
• D) Nominal GDP divided by the GDP growth rate

In a simple loan, what term is used for the initial amount provided by the lender?

• A) Interest
• B) Principal
• C) Coupon
• D) Face Value

Holding excess reserves is costly for banks because:

• A) They are automatically transferred to government accounts
• B) They are converted into foreign currency
• C) They are subject to higher taxes
• D) They cannot earn interest from lending this money

Repo transactions involve:

• A) Buying securities permanently
• B) Issuing new government bonds
• C) Selling securities with an agreement to repurchase later
• D) Lending without collateral

What formula is used to calculate the present value (PV) of future cash flows? [Here PV (Present Value), CF (Cash Flow), i (Interest Rate), n (Number of Periods)]

• A) PV = CF - i^n
• B) PV = CF / (1 + i)^n
• C) PV = CF * (1 + i)^n
• D) PV = CF / i

Which central bank requirement is linked to cash in vault?

• A) Call rate
• B) KIBOR
• C) Repo rate
• D) CRR (Cash Reserve Requirement)

What is the economic effect of increasing Cash reserve requirement (CRR)?

• A) Increases banks’ lending capacity
• B) Increases money supply and lowers interest rates
• C) Reduces money supply and raises interest rates
• D) Has no effect on liquidity

The SBP repo rate acts as:

• A) Long-term bond yield
• B) Fixed policy rate
• C) Ceiling of the interest rate corridor
• D) Floor of the interest rate corridor

The central bank acts as the government’s:

• A) Tax collector
• B) Judicial advisor
• C) Financial partner
• D) Legislative authority

According to monetarists, the sole cause of sustained inflation is:

• A) Fiscal policy
• B) Exchange rate changes
• C) Money supply growth
• D) Supply shocks