IAI March 2017 MCQ's

Discussion in 'CT7' started by Priyanshi Bhansali, May 27, 2017.

  1. 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?)
     
  2. Gresham Arnold

    Gresham Arnold ActEd Tutor Staff Member

    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
     
  3. 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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