Macroeconomic Equilibrium and Monetary Policy Quiz
Test your knowledge of macroeconomics with questions on aggregate demand, monetary tools, IS-LM model, and more. Prepare for exams!
#1
Which of the following is a component of aggregate demand?
Government spending
Consumer debt
Corporate profits
Foreign investment
#2
What is the main tool used by central banks to influence monetary policy?
Fiscal policy
Discount rate
Open market operations
Taxation
#3
Which of the following is NOT a tool of monetary policy?
Open market operations
Reserve requirement
Quantitative easing
Tariffs
#4
Which of the following is a goal of monetary policy?
Maximize GDP growth
Minimize income inequality
Stabilize prices
Encourage international trade
#5
When the economy is in macroeconomic equilibrium, what is true about aggregate demand and aggregate supply?
They are equal
Aggregate demand exceeds aggregate supply
Aggregate supply exceeds aggregate demand
There is no relationship between them
#6
What is the formula to calculate the money multiplier?
1 / Reserve Ratio
1 + Reserve Ratio
Reserve Ratio / 1
Reserve Ratio
#7
What happens to the money supply if the central bank sells government securities in open market operations?
Increases
Decreases
Remains unchanged
Becomes unpredictable
#8
In the IS-LM model, what does the LM curve represent?
Equilibrium in the goods market
Equilibrium in the money market
Relationship between investment and savings
Relationship between inflation and unemployment
#9
What is the name of the rate at which banks can borrow money overnight from the central bank?
Federal funds rate
Prime rate
Discount rate
Target rate
#10
What is the name of the monetary policy tool used to regulate the amount of money banks hold in reserve?
Discount rate
Federal funds rate
Reserve requirement
Prime rate
#11
In a liquidity trap, what happens when the central bank lowers interest rates?
Increases investment and consumption
Decreases investment and consumption
Has no effect on investment and consumption
Causes hyperinflation
#12
What does the term 'liquidity trap' refer to in macroeconomics?
A situation where interest rates are very low and savings become unresponsive to further interest rate decreases
A condition where inflation is outpacing economic growth
A period of high uncertainty leading to decreased consumer spending
A scenario where fiscal policy becomes ineffective due to excessive government debt
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