Quiz On Monetary Policy And Economic Theory
- 1.
What is monetary policy?
- A.
Credit, cash, checks, and money market mutual funds.
- B.
Marxism
- C.
Taxes and government spending.
- D.
How a central bank (or government body)manages the money supply to guide the economy and any economic growth
Correct Answer
D. How a central bank (or government body)manages the money supply to guide the economy and any economic growthExplanation
Monetary policy refers to the actions taken by a central bank or government body to manage the money supply in order to guide the economy and promote economic growth. It involves various measures such as adjusting interest rates, controlling inflation, and regulating the availability of credit and cash in the economy. By implementing monetary policy, the central bank or government aims to stabilize prices, promote employment, and maintain overall economic stability.Rate this question:
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- 2.
What tools are used to conduct monetary policy by a central bank?
- A.
Using the tax revenue collected, the government spends its money on government programs to help stimulate the economy.
- B.
Open market operations, discount rate, and reserve requirements.
- C.
Laying out infrastructure
- D.
Member banks, QE4, M2, and printing money
Correct Answer
B. Open market operations, discount rate, and reserve requirements.Explanation
The correct answer is Open market operations, discount rate, and reserve requirements. These tools are commonly used by central banks to conduct monetary policy. Open market operations involve buying or selling government securities to control the money supply. The discount rate is the interest rate at which banks can borrow from the central bank, and adjusting this rate affects the cost of borrowing for banks and influences lending behavior. Reserve requirements refer to the amount of funds that banks must hold in reserve, and changing these requirements can impact the amount of money available for lending. These tools are used to regulate the economy and manage inflation and interest rates.Rate this question:
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- 3.
What directly affects the money supply and interest rate of an economy?
- A.
Lizard men that are in disguise as Jewish Bankers
- B.
The Bilderberg Group aka the Illuminati
- C.
Barack Obama the Antchrist
- D.
Government securities such as bonds.
Correct Answer
D. Government securities such as bonds. -
- 4.
What is the purpose of government securities being sold in a marketplace?
- A.
To give the president more credit so he or she can spend more.
- B.
To make the government accumulate more wealth.
- C.
To make the government more powerful.
- D.
To make the availability of credit increase in the market and to reduce interest rates, which will encourage businesses to invest more and consumers to spend more.
Correct Answer
D. To make the availability of credit increase in the market and to reduce interest rates, which will encourage businesses to invest more and consumers to spend more.Explanation
Government securities being sold in a marketplace serve the purpose of increasing the availability of credit in the market and reducing interest rates. This, in turn, encourages businesses to invest more and consumers to spend more. By selling government securities, the government can increase the supply of credit, making it easier for businesses and individuals to borrow money. This increased availability of credit stimulates economic activity and promotes investment and spending, ultimately boosting the overall economy.Rate this question:
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- 5.
If a central bank increases the discount rate, the lending of banks will _______
- A.
Increase
- B.
Decrease
- C.
Stay the same
- D.
The banks are not affected by the discount rate.
Correct Answer
B. DecreaseExplanation
When a central bank increases the discount rate, it becomes more expensive for banks to borrow money from the central bank. As a result, banks are likely to reduce their lending activities in order to minimize their borrowing costs and maintain profitability. Therefore, the correct answer is "Decrease."Rate this question:
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- 6.
The reserve requirements stated by a central bank are held either as non-interest bearing reserves or as cash.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
The reserve requirements stated by a central bank are held either as non-interest bearing reserves or as cash. This means that banks are required to hold a certain percentage of their deposits as reserves, which can either be in the form of non-interest bearing reserves or as cash. This helps to ensure the stability and liquidity of the banking system and allows the central bank to control the money supply. Therefore, the statement is true.Rate this question:
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- 7.
By increasing the reserve ratio-requirement the banks will have better business because the banks will be able to lend more money hence more business can be conducted.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
Increasing the reserve ratio-requirement actually reduces the amount of money that banks can lend out, as they are required to hold a larger portion of their deposits as reserves. This means that banks will have less money available to lend, leading to a decrease in business opportunities. Therefore, the statement that increasing the reserve ratio-requirement will result in better business for banks is false.Rate this question:
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- 8.
Before the US and the majority of western countries converted to fiat money after the Great Depression what money standard did the typical western country use such as the United States of America?
- A.
The silver standard
- B.
The gold standard
- C.
Bartering
- D.
Western countries have always used the fiat system.
Correct Answer
B. The gold standardExplanation
Before the US and the majority of western countries converted to fiat money after the Great Depression, the typical western country, including the United States of America, used the gold standard. This means that the value of the country's currency was directly linked to a fixed amount of gold. Under the gold standard, paper money could be exchanged for a specific amount of gold, providing stability and confidence in the currency.Rate this question:
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- 9.
What school of economic thought would Adam Smith author of the wealth of nations be derived from?
- A.
The Keynesian School
- B.
The Neoclassical School
- C.
The British Classical School
- D.
The Austrian School
- E.
The Monetarist School
- F.
Marxism
Correct Answer
C. The British Classical SchoolExplanation
The correct answer is The British Classical School. Adam Smith, author of "The Wealth of Nations," is considered one of the founding figures of the British Classical School of economic thought. He emphasized the importance of free markets, individual self-interest, and the division of labor in driving economic growth and prosperity. Smith's ideas laid the foundation for classical economics and influenced subsequent economic thinkers.Rate this question:
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- 10.
Who was the founder(s) of Marxism?
- A.
Mao Zedong
- B.
Karl Marx and Friedrich Engels
- C.
Kim Jong Un of Best KOREA!
- D.
Ron Paul
- E.
Friedrich Hayek
Correct Answer
A. Mao Zedong -
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Current Version
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Mar 20, 2023Quiz Edited by
ProProfs Editorial Team -
May 04, 2015Quiz Created by
Tankguy221
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