Monetary Policy and its Effects Quiz
Test your knowledge on monetary policy tools, objectives, and effects with these insightful questions on central banking and monetary economics.
#1
Which of the following tools is used by central banks to implement monetary policy?
Fiscal policy
Interest rates
Taxation
Government spending
#2
What is the primary objective of monetary policy?
Maximizing employment
Minimizing inflation
Stabilizing economic growth
Promoting international trade
#3
What is the term for the ratio of reserves that banks are required to hold against deposits?
Liquidity ratio
Interest rate
Reserve requirement
Money multiplier
#4
What is the term for the rate at which one currency can be exchanged for another in the foreign exchange market?
Interest rate
Inflation rate
Exchange rate
Discount rate
#5
Which of the following is an expansionary monetary policy tool?
Decreasing the money supply
Increasing interest rates
Open market operations to buy government securities
Raising reserve requirements for banks
#6
What is the term for the interest rate at which the central bank lends money to commercial banks?
Prime rate
Discount rate
Federal funds rate
LIBOR rate
#7
What is the term for the purchase and sale of government securities by the central bank to influence the money supply?
Fiscal policy
Exchange rate targeting
Open market operations
Quantitative easing
#8
Which of the following is a disadvantage of using expansionary monetary policy?
Increased borrowing costs
Lowered consumer spending
Risk of inflation
Decreased investment
#9
How does contractionary monetary policy affect aggregate demand?
Decreases aggregate demand
Increases aggregate demand
Has no effect on aggregate demand
Shifts aggregate demand to the left
#10
What happens to bond prices when interest rates rise?
Bond prices rise
Bond prices fall
Bond prices remain unchanged
Bond prices become unpredictable
#11
What is the term for the process of gradually raising interest rates to prevent inflation?
Quantitative easing
Tightening monetary policy
Expansionary monetary policy
Fiscal policy
#12
Which of the following is a tool used in quantitative easing?
Decreasing reserve requirements
Selling government securities
Reducing interest rates
Buying long-term securities
Sign In to view more questions.
Quiz Questions with Answers
Forget wasting time on incorrect answers. We deliver the straight-up correct options, along with clear explanations that solidify your understanding.
Popular Quizzes in Monetary Economics
Popular Quizzes in Economics
Report