#1
2. When a commercial bank makes a loan, what happens to the money supply?
It increases
It decreases
It remains unchanged
It depends on interest rates
#2
6. What is the term for the minimum amount of reserves that a bank is required to hold?
Required Reserves
Excess Reserves
Primary Reserves
Statutory Reserves
#3
10. What is the term for the percentage of deposits that banks are required to keep as reserves by the central bank?
Reserve Ratio
Deposit Ratio
Liquidity Ratio
Fractional Reserve Ratio
#4
1. What is the primary tool used by central banks to control the money supply?
Fiscal Policy
Monetary Policy
Exchange Rate Policy
Trade Policy
#5
3. 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
#6
5. How does open market operations impact the money supply?
Buying securities increases the money supply
Selling securities increases the money supply
Buying securities decreases the money supply
Selling securities decreases the money supply
#7
7. How does the Federal Reserve use the discount rate to influence the economy?
To control inflation
To control unemployment
To regulate bank lending
To stabilize exchange rates
#8
8. What is the function of the Federal Open Market Committee (FOMC) in the United States?
Setting interest rates
Issuing currency
Supervising banks
Regulating stock markets
#9
4. In the context of money creation, what does the term 'money multiplier' refer to?
The ratio of money supply to GDP
The ratio of currency in circulation to reserves
The ratio of loans to deposits
The ratio of government spending to taxation
#10
9. When the central bank sells government securities in the open market, what effect does it have on interest rates?
Increases interest rates
Decreases interest rates
No effect on interest rates
Depends on the money supply
#11
11. In the context of monetary policy, what does the term 'inflation targeting' refer to?
Controlling the money supply to stabilize prices
Setting specific targets for employment rates
Adjusting interest rates to influence exchange rates
Encouraging banks to increase lending
#12
15. How does a central bank influence the money supply through the use of reserve requirements?
Increasing reserve requirements decreases the money supply
Decreasing reserve requirements increases the money supply
Reserve requirements have no impact on the money supply
Reserve requirements only affect interest rates
#13
16. What is the role of the central bank in implementing a contractionary monetary policy?
Buying government securities
Lowering the discount rate
Increasing the money supply
Raising interest rates