#1
What is the money multiplier?
The ratio of the money supply to the monetary base
The ratio of the monetary base to the money supply
The ratio of government spending to GDP
The ratio of inflation to interest rates
#2
Which of the following is NOT a component of the monetary base?
Currency in circulation
Reserve deposits
Bank loans
Vault cash
#3
What is the role of the Federal Reserve in the United States?
To regulate the stock market
To oversee foreign exchange rates
To conduct monetary policy and regulate banks
To manage fiscal policy and taxation
#4
What does the term 'monetary policy' refer to?
Government spending and taxation
Regulating the money supply and interest rates
International trade agreements
Managing inflation expectations
#5
How does an increase in reserve requirements affect the money supply?
It decreases the money supply
It increases the money supply
It has no effect on the money supply
It depends on the interest rate policy of the central bank
#6
What is the primary tool used by central banks to control the money supply?
Open market operations
Reserve requirements
Discount rate
Interest rate manipulation
#7
What happens to the money supply when the central bank conducts open market purchases?
It increases
It decreases
It remains unchanged
It depends on the size of the purchases
#8
Which of the following is a tool of expansionary monetary policy?
Increasing reserve requirements
Decreasing the discount rate
Selling government securities in open market operations
Raising taxes
#9
What is the main goal of contractionary monetary policy?
To reduce inflation
To stimulate economic growth
To increase aggregate demand
To lower interest rates
#10
What is the effect of an increase in the money supply on interest rates, ceteris paribus?
Interest rates increase
Interest rates decrease
No effect on interest rates
Interest rates fluctuate randomly
#11
What is the equation for the simple money multiplier?
1 / reserve ratio
1 + reserve ratio
reserve ratio / 1
reserve ratio + 1
#12
Which of the following would likely result from an increase in the discount rate by the central bank?
Increased borrowing by banks
Decreased borrowing by banks
Expansion of credit in the economy
Lower interest rates
#13
What is the significance of the money multiplier in the context of monetary policy?
It indicates the effectiveness of fiscal policy
It measures the impact of changes in the monetary base on the money supply
It determines the level of government spending
It influences exchange rates
#14
What is the relationship between the money multiplier and the reserve ratio?
They have a direct relationship
They have an inverse relationship
They are unrelated
They have a logarithmic relationship
#15
What does the term 'quantitative easing' refer to in the context of monetary policy?
Increasing interest rates to combat inflation
Reducing interest rates to stimulate economic activity
A strategy to decrease the money supply
An unconventional monetary policy tool involving large-scale asset purchases
#16
Which of the following best describes the transmission mechanism of monetary policy?
The process by which changes in monetary policy affect economic variables such as interest rates and aggregate demand
The process by which monetary policy decisions are communicated to the public
The process by which monetary policy affects only the banking sector
The process by which fiscal policy complements monetary policy