Monetary Concepts in Macroeconomics Quiz

Monetary policy is the tool used by central banks to control the money supply.

The term for a situation in which the price level is rising, leading to a decrease in the purchasing power of money is Inflation.

The name for the central bank of the United States is Federal Reserve System.

The term used to describe the rate at which the general level of prices for goods and services is rising is Inflation.

The term for the portion of income that is not spent on consumption is Savings.

M1 measures the total value of currency in circulation plus demand deposits.

The money multiplier formula in a fractional reserve banking system is Money Multiplier = 1 + Reserve Ratio.

Unit of debt is NOT a function of money.

The term used to describe the interest rate at which banks lend reserves to each other overnight is Federal funds rate.

In the context of monetary policy, 'open market operations' refer to the buying and selling of government securities by the central bank.

The name for the rate at which the central bank lends money to commercial banks is Discount rate.

According to the Quantity Theory of Money, if the money supply increases while the real GDP remains constant, the price level increases.

Government spending is NOT a tool of monetary policy.

The term 'liquidity trap' refers to a situation where interest rates are so low that monetary policy becomes ineffective.

In macroeconomics, the term 'MV = PY' represents the Quantity theory of money.

The name for the process of converting government debt into money supply is Debt monetization.