#1
Which of the following is a characteristic of fiat money?
Its value is derived from the government decree.
ExplanationFiat money's value is determined by government declaration.
#2
What is the primary function of a central bank?
To regulate monetary policy
ExplanationCentral banks primarily regulate monetary policy.
#3
Which of the following is a characteristic of commodity money?
It has intrinsic value based on the material it's made of.
ExplanationCommodity money has intrinsic value from its material.
#4
What does M1 measure in monetary economics?
The total value of physical currency plus demand deposits
ExplanationM1 measures physical currency and demand deposits' total value.
#5
What is the term used to describe the interest rate at which banks lend reserves to each other overnight?
Federal funds rate
ExplanationFederal funds rate: interest rate for overnight interbank loans.
#6
Which of the following is NOT a function of money?
Unit of labor
ExplanationMoney does not serve as a unit of labor.
#7
What is the term used to describe the process of increasing the money supply in an economy?
Expansionary monetary policy
ExplanationExpansionary monetary policy: increasing the money supply.
#8
Which of the following is a tool of monetary policy used by central banks?
Quantitative easing
ExplanationQuantitative easing is a tool of central banks' monetary policy.
#9
What is the 'Liquidity Trap' in economics?
A situation where consumers prefer to hold onto cash rather than spend or invest
ExplanationLiquidity trap: consumers hold cash, avoiding spending or investing.
#10
What is the term used to describe the purchase of government securities by the central bank from the open market?
Open market operations
ExplanationOpen market operations: central bank buying government securities.
#11
In the context of central banking, what does 'Reserve Requirement' refer to?
The percentage of deposits that banks must hold in reserve
ExplanationReserve Requirement: percentage of deposits banks must hold.
#12
What is the term used to describe the total amount of money in circulation in an economy?
Money supply
ExplanationMoney supply: total amount of money in an economy.
#13
Which of the following is a characteristic of hyperinflation?
Inflation rate exceeding 50% per month
ExplanationHyperinflation: inflation exceeding 50% monthly.
#14
What is the term used to describe the practice of adjusting the money supply to influence economic activity?
Monetary policy
ExplanationMonetary policy: adjusting money supply to influence economy.
#15
What is the term used to describe the rate at which one currency can be exchanged for another?
Exchange rate
ExplanationExchange rate: the rate of currency exchange.
#16
What is the term used to describe a situation where a country's imports exceed its exports?
Trade deficit
ExplanationTrade deficit: imports surpassing exports in a country.
#17
What is the term used to describe a situation where there is a general decrease in the price level of goods and services?
Deflation
ExplanationDeflation: general decrease in the price level.
#18
What is the term used to describe a situation where there is a simultaneous occurrence of inflation and stagnation in an economy?
Stagflation
ExplanationStagflation: simultaneous inflation and stagnation.
#19
In the context of monetary policy, what is 'Forward Guidance'?
A communication strategy used by central banks to influence expectations about future policy actions.
ExplanationForward Guidance: central banks' communication strategy to shape expectations about future policy actions.