Interest Rates and Factors Affecting Their Determination Quiz Test your knowledge of monetary economics with questions on factors affecting interest rates, central bank actions, and more. Explore the world of finance!
#1
Which of the following is NOT a factor affecting interest rates?Inflation rate
Monetary policy
Foreign exchange rates
GDP growth rate
#2
What happens to interest rates when the central bank increases the money supply?Interest rates increase
Interest rates decrease
Interest rates remain unchanged
It depends on other factors
#3
Which term refers to the interest rate that banks charge their most creditworthy customers?Prime rate
LIBOR
Federal funds rate
Discount rate
#4
Which of the following is NOT a tool of monetary policy used by central banks to influence interest rates?Open market operations
Reserve requirement
Treasury bill auctions
Discount rate changes
#5
Which of the following is a characteristic of a fixed-rate mortgage?The interest rate fluctuates over time
The monthly payments vary depending on market conditions
The interest rate remains constant for the entire loan term
The borrower can choose to pay different interest rates each month
#6
What is the term for the rate at which banks lend money to their most creditworthy customers?LIBOR
Prime rate
Federal funds rate
Discount rate
#7
Which term refers to the interest rate banks charge each other for overnight loans?Prime rate
Discount rate
Federal funds rate
LIBOR
#8
What effect does high inflation typically have on interest rates?Interest rates decrease
Interest rates increase
Interest rates remain unchanged
It depends on other factors
#9
What is the relationship between bond prices and interest rates?Bond prices and interest rates move in opposite directions
Bond prices and interest rates move in the same direction
Bond prices are not affected by interest rates
Bond prices and interest rates have no relationship
#10
What is the term for a situation where short-term interest rates are higher than long-term rates?Inverted yield curve
Flat yield curve
Normal yield curve
Steep yield curve
#11
What impact does a decrease in the money supply typically have on interest rates?Interest rates decrease
Interest rates increase
Interest rates remain unchanged
It depends on other factors
#12
What is the term for the interest rate that a bondholder receives if the bond is held until maturity?Nominal rate
Real rate
Yield to maturity
Coupon rate
#13
What is the Fisher effect in relation to interest rates?An increase in inflation leads to a proportionate increase in nominal interest rates
A decrease in inflation leads to a decrease in nominal interest rates
An increase in inflation leads to a decrease in nominal interest rates
There is no relationship between inflation and nominal interest rates
#14
What does the term 'liquidity trap' refer to in the context of interest rates?A situation where interest rates are so high that borrowing becomes unfeasible
A situation where interest rates are so low that monetary policy becomes ineffective
A situation where interest rates remain stable over a long period
A situation where interest rates are unpredictable
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