#1
Which of the following is a tool used by central banks to control the money supply?
Monetary policy
ExplanationCentral banks use monetary policy to regulate the money supply.
#2
What is the primary goal of expansionary fiscal policy?
To stimulate economic growth
ExplanationExpansionary fiscal policy aims to boost economic activity and encourage growth.
#3
What is the primary tool used by central banks to implement monetary policy?
Open market operations
ExplanationCentral banks primarily use open market operations to adjust the money supply.
#4
Which of the following is an example of an automatic stabilizer in fiscal policy?
Unemployment insurance
ExplanationUnemployment insurance automatically kicks in during economic downturns, stabilizing the economy.
#5
Which of the following is a measure of income inequality?
Gini coefficient
ExplanationThe Gini coefficient is a measure of income inequality within a population.
#6
Which of the following is a characteristic of contractionary monetary policy?
Decreasing the money supply
ExplanationContractionary monetary policy involves reducing the amount of money circulating in the economy.
#7
What is the 'Phillips Curve' used to illustrate?
The relationship between inflation and unemployment
ExplanationThe Phillips Curve shows the trade-off between inflation and unemployment rates.
#8
What does the term 'stagflation' refer to?
A combination of high inflation and high unemployment
ExplanationStagflation is the simultaneous occurrence of high inflation and high unemployment.
#9
Which of the following is a goal of supply-side economics?
Promoting economic growth through tax cuts and deregulation
ExplanationSupply-side economics aims to boost economic growth by cutting taxes and reducing regulations.
#10
Which of the following is a tool of expansionary monetary policy?
Decreasing the discount rate
ExplanationLowering the discount rate is a tool of expansionary monetary policy to stimulate borrowing and spending.
#11
In the context of macroeconomic policy, what does the term 'crowding out' refer to?
Decrease in private sector investment due to government borrowing
ExplanationCrowding out occurs when increased government borrowing reduces private sector investment.
#12
What is the primary objective of a contractionary fiscal policy?
To decrease aggregate demand
ExplanationContractionary fiscal policy aims to reduce aggregate demand to control inflation.
#13
What does the term 'liquidity trap' refer to?
A situation where monetary policy becomes ineffective due to very low interest rates
ExplanationA liquidity trap occurs when monetary policy loses effectiveness due to very low interest rates.
#14
In the context of monetary policy, what does 'quantitative easing' involve?
Increasing the money supply by purchasing government securities
ExplanationQuantitative easing entails buying government securities to inject money into the economy and lower interest rates.
#15
What is the term for the situation where an economy experiences a prolonged period of declining economic activity?
Depression
ExplanationA depression is a severe and prolonged economic downturn marked by declining GDP, high unemployment, and deflation.