#1
Which of the following is an instrument of monetary policy?
Open market operations
ExplanationBuying or selling government securities to control money supply
#2
What does expansionary monetary policy aim to achieve?
Stimulate economic growth
ExplanationIncrease money supply to boost spending and investment
#3
What is the main tool used by central banks to control the money supply?
Reserve requirements
ExplanationMandating the minimum reserves banks must hold
#4
What is the name of the central bank of the United States?
Federal Reserve
ExplanationU.S. central banking authority
#5
What is the term used to describe a situation where the government spends more money than it collects in revenue?
Fiscal deficit
ExplanationBudget shortfall due to government spending exceeding revenue
#6
What is the term used to describe the process by which the central bank buys or sells government securities in the open market?
Open market operations
ExplanationCentral bank's trading of government bonds to affect money supply
#7
Which of the following is an example of contractionary monetary policy?
Buying government securities in the open market
ExplanationDecrease money supply to reduce inflation
#8
What is the purpose of the Taylor Rule in macroeconomics?
To determine optimal interest rates based on inflation and output gaps
ExplanationGuideline for central bank interest rate decisions
#9
What is the Phillips Curve?
A graphical representation of the relationship between inflation and unemployment
ExplanationIllustrates trade-off between inflation and unemployment
#10
What is the term used to describe the situation when the economy experiences both high inflation and high unemployment?
Stagflation
ExplanationCombination of stagnant growth and inflation
#11
What is the role of the Federal Open Market Committee (FOMC) in the United States?
Conducting monetary policy
ExplanationOversees monetary policy operations in the U.S.
#12
Which of the following is NOT a function of money in an economy?
Unit of inflation
ExplanationNot a typical function; money is not used to measure inflation
#13
What is the term used to describe the rate at which commercial banks borrow reserves from the central bank?
Discount rate
ExplanationInterest rate charged by central banks on loans to commercial banks
#14
What does the term 'liquidity trap' refer to in macroeconomics?
A situation where monetary policy becomes ineffective because interest rates are already very low
ExplanationPolicy ineffectiveness due to zero-bound interest rates