The central bank controls interest rates primarily to:
A) Increase government revenue
B) Regulate inflation and economic growth
C) Boost the stock market
D) Encourage exports
When interest rates rise, borrowing typically:
A) Increases
B) Decreases
C) Remains unchanged
D) Has no impact on businesses
Which of the following is a direct effect of lower interest rates?
A) Higher saving rates
B) Increased investment and spending
C) Reduced money supply
D) Lower inflation
Higher interest rates generally lead to:
A) Increased consumer spending
B) Lower borrowing costs
C) Decreased inflationary pressure
D) A weaker currency
The policy rate set by the central bank is known as:
A) Discount rate
B) Corporate tax rate
C) Dividend rate
D) Consumer interest rate
An economy experiencing rapid inflation may require:
A) Lower interest rates
B) Higher interest rates
C) Fixed exchange rates
D) Increased government borrowing
What happens to bond prices when interest rates rise?
A) Increase
B) Decrease
C) Stay the same
D) No impact
Which of the following is a tool of monetary policy?
A) Tax incentives
B) Interest rate adjustments
C) Government subsidies
D) Trade tariffs
The relationship between interest rates and inflation is typically:
A) Directly proportional
B) Inversely proportional
C) Unrelated
D) Random
A decrease in interest rates usually results in:
A) Higher loan repayment costs
B) Increased business investments
C) Reduced demand for housing
D) Decreased money supply
Which of the following sectors is most affected by rising interest rates?
A) Technology
B) Banking and real estate
C) Agriculture
D) Tourism
Lower interest rates generally lead to:
A) Increased foreign capital inflows
B) Higher bond yields
C) Increased household consumption
D) A stronger local currency
What does the central bank do when it wants to control inflation?
A) Lowers interest rates
B) Raises interest rates
C) Increases money supply
D) Reduces bank reserves
A higher interest rate environment is beneficial for:
A) Borrowers
B) Lenders and savers
C) Real estate investors
D) Stock market investors
When central banks lower interest rates, the economy generally:
A) Contracts
B) Expands
C) Remains stable
D) Faces high unemployment
Which factor does NOT directly influence interest rates?
A) Inflation
B) Government borrowing
C) Weather conditions
D) Central bank policy
Which of the following is an example of a fixed interest rate loan?
A) A loan with an interest rate that fluctuates monthly
B) A loan with an unchanging interest rate throughout its term
C) A credit card with changing APR
D) A loan with interest rates tied to market fluctuations
An increase in interest rates generally results in:
A) Lower savings
B) A depreciation of the national currency
C) Reduced investment in the stock market
D) Increased demand for housing
Which type of interest rate varies with market conditions?
A) Fixed rate
B) Variable rate
C) Discount rate
D) Prime rate
If interest rates are too low for an extended period, what might happen?
A) Hyperinflation
B) Decreased borrowing
C) Decreased consumer spending
D) Higher unemployment
A negative real interest rate occurs when:
A) Nominal interest rates are higher than inflation
B) Inflation is higher than nominal interest rates
C) Interest rates remain constant
D) The stock market crashes
If a country has high interest rates, foreign investors are likely to:
A) Invest more in that country
B) Withdraw their investments
C) Shift their capital to low-interest economies
D) Ignore the interest rate changes
Interest rate hikes generally lead to:
A) Higher stock market valuations
B) A decrease in inflation
C) Increased borrowing
D) Higher economic growth
Which is NOT a common factor affecting interest rates?
A) Central bank policies
B) Inflation expectations
C) Public holidays
D) Economic growth
The real interest rate is calculated by subtracting ______ from the nominal interest rate.
A) Inflation rate
B) GDP growth rate
C) Unemployment rate
D) Exchange rate
How do rising interest rates affect the housing market?
A) Increase mortgage demand
B) Reduce home affordability
C) Lead to lower bank reserves
D) Increase stock market returns
When central banks raise interest rates, the currency usually:
A) Depreciates
B) Appreciates
C) Remains unchanged
D) Loses all value
Which interest rate do banks charge their most creditworthy customers?
A) Discount rate
B) Prime rate
C) Nominal rate
D) Market rate
Which statement is true regarding interest rates and economic cycles?
A) Low interest rates slow down economic growth
B) High interest rates encourage more borrowing
C) Central banks use interest rates to influence economic activity
D) Interest rates have no effect on consumer behavior
