According to Ben Bernanke, the Fed’s non-conventional policies during the crisis were better described as:

• A) Credit Easing
• B) Exchange Rate Intervention
• C) Fiscal Stimulus
• D) Quantitative Easing

What is the primary tool of monetary policy?

• A) Discount window loans
• B) Reserve requirements
• C) Interest rate on reserves
• D) Open Market Operations (OMO)

During the global financial crisis of 2008, which conventional monetary policy tool became ineffective due to the interest rate reaching zero?

• A) Open Market Operations
• B) Discount Rate
• C) Reserve Requirement
• D) Policy Rate

The Fed’s Term Auction Facility (TAF) began with how much funding?

• A) $100 billion
• B) $10 billion
• C) $400 billion
• D) $20 billion

In what way, can unexpected inflation reduce unemployment?

• A) By discouraging government spending
• B) By lowering real wages under existing contracts
• C) By reducing aggregate demand
• D) By eliminating menu costs

How do credit-rating agencies assist investors in the bond market?

• A) They control the supply of bonds in the market
• B) They determine the bond's maturity period
• C) They set the interest rates for bonds
• D) They help investors by providing objective and reliable information about the risk level of bonds

The function of the central bank as a "lender of last resort" ensures:

• A) The public always has free loans
• B) Inflation is permanently eliminated
• C) Commercial banks avoid collapse during crises
• D) Government loans are never defaulted

The reserve requirement ratio directly influences:

• A) The discount rate
• B) The demand for reserves
• C) The policy rate corridor
• D) The supply of reserves

Cash reserve requirement (CRR) requires banks to hold:

• A) A percentage of deposits in foreign reserves
• B) A percentage of deposits with commercial banks
• C) A percentage of deposits in approved securities
• D) A percentage of deposits as cash with SBP

Forward guidance mainly aims to influence:

• A) Exchange rates
• B) Fiscal spending
• C) Long-term interest rate expectations
• D) Reserve ratios

At which point does equilibrium occur in the money market?

• A) When the quantity of money demanded is zero
• B) When the quantity of money demanded exceeds the quantity of money supplied
• C) When the quantity of money supplied equals the quantity of money demanded
• D) When the interest rate is at its highest level

What happens to the demand for corporate bonds if their liquidity decreases relative to Treasury bonds?

• A) The demand for corporate bonds remains unchanged
• B) The demand for corporate bonds decreases
• C) The demand for corporate bonds increases
• D) The demand for corporate bonds fluctuates randomly

What is the formula for calculating the Consumer Price Index (CPI)?

• A) (Price of goods in current year / Price of goods in base year) x 100
• B) (Real GDP / Nominal GDP) x 100
• C) (Basket Cost in current year / Basket Cost in base year) x 100
• D) (Cost of basket in base year / Cost of basket in current year) x 100

The term inflation is defined as:

• A) The decrease in the prices of goods and services over time
• B) The level of government spending in an economy
• C) The rate at which the prices of goods and services increase over time
• D) The rate at which the money supply increases

The equation “Bs - Bd = Md - Ms” in the Liquidity Preference Framework implies that:

• A) Equilibrium in the money market results in equilibrium in the bond market
• B) There is a direct relationship between the money supply and bond prices
• C) A decrease in the supply of money leads to lower interest rates
• D) The bond market cannot influence the money market

What is a risk premium in the context of bonds?

• A) The tax rate applied to bond interest payments
• B) The additional interest an investor must earn to hold a risky bond instead of a default-free bond
• C) The difference between the bond's market price and face value
• D) The price at which a bond can be traded in the secondary market

Which of the following is a primary objective of the State Bank of Pakistan (SBP)?

• A) Promoting economic growth and stability
• B) Financing private corporations directly
• C) Reducing exports and imports
• D) Privatizing the banking system

How does a lower real interest rate affect firms’ balance sheets according to the balance sheet channel?

• A) Increases adverse selection
• B) Decreases lending
• C) Increases net worth
• D) Reduces net worth

In Keynes’s framework, the expected return on bonds is:

• A) Unrelated to the interest rate
• B) Equal to the interest rate (i)
• C) Equal to zero
• D) Negative

What is the primary difference between nominal GDP and real GDP?

• A) Nominal GDP excludes certain services, while real GDP includes all services
• B) Nominal GDP is adjusted for inflation, while real GDP is not
• C) Nominal GDP reflects the growth in quantities, while real GDP does not
• D) Nominal GDP is measured in current prices, while real GDP is adjusted for price changes