Monetary Policy and the Money Supply Quiz

Central banks use monetary policy to influence the money supply.

Monetary policy aims to stabilize the economy.

Unit of labor is not a function of money.

Taxation is not a tool of monetary policy.

Central banks use open market operations to increase the money supply.

The discount rate is the interest rate at which central banks lend to commercial banks.

The money supply increases when the central bank buys government securities.

Reserve ratio is the ratio of reserves to deposits that banks must maintain.

Decreasing the discount rate increases the money supply.

The buying and selling of government securities by the central bank to control the money supply is called open market operations.

Raising the discount rate is a contractionary monetary policy action.

The money multiplier is the ratio of reserves to deposits.

The money multiplier is the ratio of the money supply to the monetary base.

A currency board maintains a fixed exchange rate with another currency.