#1
Which of the following tools is used by central banks to control the money supply?
Monetary policy
ExplanationMonetary policy is employed by central banks to regulate the money supply.
#2
What is the main objective of expansionary monetary policy?
To increase economic growth
ExplanationExpansionary monetary policy aims to boost economic growth.
#3
What is the primary tool used by central banks to influence the money supply?
Open market operations
ExplanationOpen market operations are the primary tool for controlling the money supply.
#4
Which of the following is NOT a tool of monetary policy used by central banks?
Government spending
ExplanationGovernment spending is not a direct tool of monetary policy.
#5
Which of the following is a primary goal of central banks when implementing monetary policy?
Stabilizing prices
ExplanationStabilizing prices is a key goal of central banks in monetary policy.
#6
Which of the following is a tool of monetary policy used to control short-term interest rates?
Open market operations
ExplanationOpen market operations are used to influence short-term interest rates.
#7
What is the term used to describe the interest rate at which the central bank lends money to commercial banks?
Discount rate
ExplanationThe discount rate is the interest rate at which the central bank lends to commercial banks.
#8
What is the term used to describe the purchase and sale of government securities by the central bank?
Open market operations
ExplanationOpen market operations involve buying and selling government securities to regulate the economy.
#9
In which of the following situations would a central bank likely pursue an expansionary monetary policy?
During a recession
ExplanationExpansionary policy is typically adopted during economic recessions.
#10
Which of the following is a goal of contractionary monetary policy?
Stabilizing prices
ExplanationContractionary policy aims to stabilize prices and control inflation.
#11
Under what circumstances might a central bank use contractionary monetary policy?
To combat inflation
ExplanationContractionary monetary policy is employed to counteract inflation.
#12
Which of the following is NOT a transmission mechanism through which monetary policy affects the economy?
Government spending
ExplanationGovernment spending is not a direct transmission mechanism of monetary policy.
#13
When a central bank decreases the reserve requirement, what effect does it have on the money supply?
Increases the money supply
ExplanationReducing the reserve requirement boosts the money supply.