Monetary policy is primarily concerned with:
A) Managing government spending
B) Controlling inflation and stabilizing the currency
C) Balancing the national budget
D) Managing trade deficits
Which of the following is an example of a tool used in monetary policy?
A) Government taxation
B) Open market operations
C) Fiscal spending
D) Import tariffs
The central bank’s primary objective is to:
A) Maximize government revenue
B) Control inflation and stabilize the economy
C) Increase government debt
D) Regulate international trade
The most commonly used tool of monetary policy is:
A) Setting interest rates
B) Government subsidies
C) Adjusting tax rates
D) Changing government spending
A decrease in the reserve requirement of banks would:
A) Increase the money supply
B) Reduce inflation
C) Decrease the money supply
D) Lower interest rates
Which of the following actions would the central bank take to increase the money supply?
A) Increase reserve requirements
B) Sell government bonds
C) Lower interest rates
D) Increase the discount rate
A restrictive monetary policy is used to:
A) Reduce inflation
B) Increase economic growth
C) Lower interest rates
D) Boost government spending
Which tool of monetary policy involves the buying and selling of government bonds?
A) Open market operations
B) Discount rate
C) Reserve requirements
D) Interest rates
The discount rate refers to:
A) The interest rate at which commercial banks borrow from the central bank
B) The rate at which the central bank lends to the government
C) The rate at which businesses borrow from commercial banks
D) The rate at which foreign governments borrow from the central bank
The ultimate goal of monetary policy is to:
A) Maximize government revenues
B) Maintain stable inflation and full employment
C) Increase exports
D) Reduce government spending
An expansionary monetary policy is typically used to:
A) Control inflation
B) Stimulate economic growth
C) Reduce government debt
D) Raise interest rates
Which of the following can be an effect of raising interest rates?
A) Increased inflation
B) Reduced consumer spending
C) Increased money supply
D) Increased economic growth
When the central bank conducts open market operations, it:
A) Adjusts the reserve requirement
B) Buys or sells government securities
C) Changes the tax rates
D) Adjusts the currency exchange rates
A central bank might lower the reserve requirement in order to:
A) Increase inflation
B) Increase the money supply
C) Control the exchange rate
D) Reduce unemployment
If the central bank lowers interest rates, it is likely trying to:
A) Cool down an overheated economy
B) Stimulate borrowing and spending
C) Control the money supply
D) Increase inflation
The Federal Reserve uses monetary policy primarily to:
A) Influence interest rates and control inflation
B) Balance the national budget
C) Regulate government spending
D) Control fiscal deficits
Which of the following is true about the reserve requirement?
A) It is set by commercial banks
B) It is the amount of money banks must hold in reserve and not lend out
C) It is set by the government
D) It does not affect the money supply
Which of the following would be an example of an expansionary monetary policy?
A) Raising interest rates
B) Selling government securities
C) Lowering the discount rate
D) Increasing reserve requirements
The central bank typically uses which tool to directly control inflation?
A) Changing the discount rate
B) Changing government spending
C) Raising taxes
D) Adjusting import tariffs
Which of the following is a likely outcome of tight or contractionary monetary policy?
A) Increased inflation
B) Higher interest rates and reduced money supply
C) Economic stimulus
D) Increased government spending
When the central bank increases the money supply, it typically aims to:
A) Decrease inflation
B) Stimulate the economy
C) Increase the value of the currency
D) Raise interest rates
A primary tool for controlling inflation through monetary policy is:
A) Reducing government spending
B) Open market operations
C) Increasing interest rates
D) Raising taxes
In monetary policy, “liquidity” refers to:
A) The government’s ability to tax
B) The ease with which assets can be converted into cash
C) The rate at which banks lend to each other
D) The level of foreign exchange reserves
Which of the following is NOT a tool used in monetary policy?
A) Open market operations
B) Reserve requirements
C) Government subsidies
D) Discount rate
The central bank can influence the economy by adjusting:
A) Tax rates
B) Interest rates
C) Foreign exchange reserves
D) Public debt
An increase in the reserve requirement leads to:
A) An increase in money supply
B) A decrease in the money supply
C) A higher level of government spending
D) Increased inflation
Which of the following is true when interest rates are lowered by the central bank?
A) There is less borrowing and spending
B) The economy may experience lower growth
C) Borrowing and spending tend to increase
D) Inflation generally decreases
The central bank may raise interest rates to:
A) Encourage borrowing
B) Stimulate economic growth
C) Slow down inflation
D) Lower unemployment
Which of the following describes a contractionary monetary policy?
A) Lowering taxes to stimulate the economy
B) Raising interest rates to slow down inflation
C) Increasing government spending to boost growth
D) Reducing the reserve requirement to increase lending
