#1
Which of the following is NOT a tool used by central banks for monetary policy?
Open market operations
Fiscal policy
Reserve requirements
Discount rate
#2
What is the primary function of commercial banks in relation to monetary policy?
To issue currency
To control inflation
To implement monetary policy
To regulate fiscal policy
#3
Which of the following is a potential consequence of loose monetary policy?
High interest rates
Deflationary pressure
Increased borrowing and spending
Decreased money supply
#4
What is the primary objective of contractionary monetary policy?
Stimulate economic growth
Control inflation
Increase unemployment
Encourage borrowing
#5
What is the Phillips Curve relationship in the context of monetary policy?
There is a trade-off between inflation and unemployment
There is a direct relationship between inflation and interest rates
There is an inverse relationship between money supply and inflation
There is no relationship between inflation and economic variables
#6
What is the purpose of quantitative easing as a monetary policy tool?
To decrease the money supply
To stimulate economic growth
To decrease government spending
To reduce interest rates
#7
In the context of monetary policy, what does 'tightening' refer to?
Decreasing interest rates
Increasing the money supply
Decreasing the money supply
Decreasing reserve requirements
#8
How does an increase in bank credit affect the economy during an economic downturn?
It exacerbates the downturn by reducing liquidity
It mitigates the downturn by increasing liquidity
It has no effect on the downturn
It stabilizes the economy by increasing inflation
#9
What role does the central bank play in influencing interest rates?
It has no influence on interest rates
It directly sets interest rates
It indirectly influences interest rates through monetary policy
It only regulates interest rates for government bonds
#10
What is the primary objective of open market operations conducted by central banks?
To regulate government spending
To control the exchange rate
To influence interest rates and the money supply
To stabilize stock markets
#11
What is the role of the Federal Reserve in the implementation of monetary policy in the United States?
It sets fiscal policy
It regulates commercial banks
It has no role in monetary policy
It conducts open market operations and sets interest rates
#12
What is the effect of a decrease in the discount rate by the central bank?
It encourages borrowing and spending
It decreases the money supply
It increases unemployment
It leads to deflation
#13
What is the 'money multiplier' in the context of banking and monetary policy?
The ratio of money supply to GDP
The ratio of bank reserves to deposits
The ratio of loans to deposits
The ratio by which deposits create additional money in the economy
#14
How does the central bank use reserve requirements as a monetary policy tool?
To control the money supply
To regulate consumer spending
To determine the discount rate
To issue government bonds
#15
How does the central bank control the federal funds rate?
By buying and selling government bonds in the open market
By adjusting reserve requirements
By setting the prime interest rate
By controlling the discount rate
#16
How does the central bank intervene in currency markets to influence exchange rates?
By issuing government bonds
By setting reserve requirements
By conducting open market operations
By buying or selling its own currency
#17
What is the primary objective of forward guidance as a monetary policy tool?
To stabilize exchange rates
To provide guidance on future interest rate policies
To regulate government spending
To control inflation