#1
What is the primary goal of monetary policy?
All of the above
ExplanationTo control inflation, stabilize employment, and promote economic growth.
#2
Which of the following is a measure of the money supply that includes cash and checking deposits?
M1
ExplanationIncludes currency in circulation and demand deposits.
#3
What is the primary function of the Federal Reserve System in the United States?
Monetary policy regulation
ExplanationRegulates money supply and interest rates to achieve economic goals.
#4
According to the Quantity Theory of Money, what is the relationship between money supply and price level?
Direct relationship
ExplanationAn increase in money supply leads to proportional increase in prices.
#5
What is the primary objective of fiscal policy?
Maximize employment and control inflation
ExplanationUsing government spending and taxation to stabilize the economy.
#6
Which of the following is a tool of expansionary monetary policy?
Open market operations
ExplanationBuying government securities to increase the money supply.
#7
What does the term 'Laffer curve' represent in macroeconomics?
The relationship between tax rates and tax revenue
ExplanationIllustrates the trade-off between tax rates and government revenue.
#8
What is the Phillips Curve in macroeconomics commonly used to depict?
The relationship between inflation and unemployment
ExplanationShows the inverse relationship between unemployment and inflation.
#9
What is the primary tool used by central banks to control the money supply?
Open market operations
ExplanationBuying and selling government securities to regulate money supply.
#10
In the context of central banking, what does the term 'lender of last resort' refer to?
A central bank providing emergency funds to financial institutions
ExplanationTo prevent financial crises by providing liquidity in times of need.
#11
In the context of monetary theory, what does the term 'velocity of money' refer to?
The rate at which money changes hands in the economy
ExplanationHow quickly money circulates in the economy.
#12
Which economist is known for the Quantity Theory of Money?
Milton Friedman
ExplanationMilton Friedman is the primary proponent of this theory.
#13
What is the Fisher effect in the context of monetary economics?
The impact of inflation on real interest rates
ExplanationInflation affects the real returns on savings and investments.
#14
Which economic indicator is often considered a lagging indicator in the business cycle?
Unemployment rate
ExplanationChanges in unemployment typically follow changes in the overall economy.
#15
What is the Taylor Rule in the context of monetary policy?
A guideline for setting interest rates based on inflation and output gaps
ExplanationHelps central banks adjust interest rates in response to economic conditions.