Banking System and Money Creation Quiz

Test your knowledge of Monetary Economics with these 17 questions on banking institutions, money creation, central banks, and economic policies.

#1

Which institution regulates the banking system in the United States?

Federal Reserve System
World Bank
International Monetary Fund
Securities and Exchange Commission
#2

What is the primary function of commercial banks?

Issuing currency
Providing loans and accepting deposits
Regulating monetary policy
Supervising other financial institutions
#3

What is the term for the process of converting assets into cash?

Leveraging
Liquidation
Amortization
Diversification
#4

Which of the following is NOT a function of a central bank?

Regulating monetary policy
Issuing currency
Supervising commercial banks
Providing loans to individuals
#5

What is the term for the interest rate that banks charge each other for overnight loans?

Federal funds rate
Prime rate
Libor rate
Discount rate
#6

Which of the following is NOT a function of money?

Medium of exchange
Store of value
Unit of labor
Measure of value
#7

What is the term for the minimum amount of reserves that banks are required to hold by the central bank?

Excess reserves
Required reserves
Liquidity reserves
Interest reserves
#8

What is the process by which banks create money through the issuance of loans?

Fractional reserve banking
Monetary policy
Open market operations
Quantitative easing
#9

What is the term for the ratio of a bank's reserves to its total deposits?

Loan-to-deposit ratio
Capital adequacy ratio
Reserve requirement ratio
Liquidity ratio
#10

Which of the following tools is used by central banks to control the money supply?

Inflation targeting
Fiscal policy
Reserve requirements
Foreign exchange intervention
#11

What is the term for the total value of all goods and services produced in a country within a given time period?

Gross domestic product (GDP)
Consumer price index (CPI)
Inflation rate
Unemployment rate
#12

Which of the following is a tool of monetary policy used by central banks to influence the economy?

Tariffs
Subsidies
Open market operations
Corporate taxes
#13

What is the name for the interest rate at which the central bank lends money to commercial banks?

Prime rate
Discount rate
Federal funds rate
Libor rate
#14

What is the term for the risk that a borrower may not repay a loan?

Credit risk
Interest rate risk
Market risk
Liquidity risk
#15

What is the term for a situation where inflation rises rapidly, leading to a decrease in the purchasing power of money?

Hyperinflation
Deflation
Stagflation
Recession
#16

What is the term for a period of declining economic activity characterized by high unemployment and reduced production?

Recovery
Expansion
Recession
Boom
#17

What is the term for the risk that an investment's value will decline due to factors specific to that investment?

Systematic risk
Diversifiable risk
Market risk
Interest rate risk

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