#1
Which of the following is a tool of monetary policy?
Open market operations
ExplanationBuying and selling government securities to control the money supply.
#2
Which of the following is NOT a tool of monetary policy?
Taxation
ExplanationTaxation is a fiscal policy tool.
#3
What is the name of the central bank of the European Union?
European Central Bank
ExplanationResponsible for monetary policy in the Eurozone.
#4
What is the name of the policy that involves increasing the money supply to stimulate economic activity?
Expansionary monetary policy
ExplanationIncreasing money supply to encourage borrowing and spending.
#5
What is the term for the phenomenon where prices of goods and services rise over time?
Inflation
ExplanationGeneral increase in prices.
#6
What is the main objective of contractionary monetary policy?
Control inflation
ExplanationTo reduce the money supply to curb inflationary pressures.
#7
What is the name given to the interest rate at which the central bank lends money to commercial banks?
Discount rate
ExplanationThe rate at which central banks provide short-term loans to commercial banks.
#8
What does an increase in the reserve requirement by the central bank typically lead to?
Decreased money supply
ExplanationBanks must hold more reserves, reducing their ability to lend, thus decreasing the money supply.
#9
What is the term for the situation when a country's imports exceed its exports?
Current account deficit
ExplanationNegative balance of trade in goods and services.
#10
Which of the following is NOT a goal of monetary policy?
High economic growth
ExplanationWhile economic growth may be a consequence, it's not a direct goal of monetary policy.
#11
In a recessionary gap scenario, what type of monetary policy is typically employed?
Expansionary
ExplanationIncreasing the money supply to stimulate economic activity and boost aggregate demand.
#12
What is the term used to describe the phenomenon where an increase in the money supply leads to a proportional increase in price levels?
Quantity theory of money
ExplanationTheory stating that changes in the money supply directly affect the price level.
#13
What is the primary function of the Federal Reserve System in the United States?
Conduct monetary policy
ExplanationRegulate the money supply and interest rates to achieve economic goals.
#14
In the context of monetary policy, what is the term for the rate at which banks lend reserves to each other overnight?
Federal funds rate
ExplanationInterest rate banks charge each other for overnight loans.
#15
What is the name of the committee that sets the key interest rate in the United States?
Federal Open Market Committee
ExplanationResponsible for setting monetary policy by determining interest rates.