AT3 Practice

AT3 Practice Quiz

By Bảo Katherine

Multiple Choice

What is the main goal of monetary policy?

• To maximize government spending

• To maintain inflation at 5–6%

• To stabilize the currency, achieve full employment and economic growth

• To reduce government debt

Multiple Choice

Which of the following is an example of a contractionary monetary policy stance?

• Lowering the interest rate to increase AD

• Increasing the cash rate to reduce inflation

• Increasing government spending

• Cutting taxes to boost private investment

Multiple Choice

What happens when the Central Bank sells bonds in an Open Market Operation (OMO)?

• Money supply increases

• Interest rates fall

• Cash rate decreases

• Money supply decreases

Multiple Choice

Which is a component of government outlays in budgetary policy?

• Corporate profits

• Private investments

• Capital expenditure

• Monetary transfers by commercial banks

Multiple Choice

Which of the following describes a budget deficit?

• Revenues > Expenditures

• Expenditures = Revenues

• Expenditures > Revenues

• Taxes are cut and interest rates are raised

Multiple Choice

An economy is facing low inflation and high unemployment. Which of the following policies is most appropriate if the government adopts a loosening stance?

• Increase interest rates to attract foreign capital

• Reduce income taxes to encourage household spending

• Cut welfare programs to reduce fiscal deficit

• Introduce new environmental regulations to reduce business activity

Multiple Choice

In which scenario is expansionary monetary policy most appropriate?

• Inflation is at 6%, and GDP growth is high

• Unemployment is rising and consumption is falling

• Exchange rate is depreciating rapidly

• Budget deficit is increasing due to high government spending

Multiple Choice

A government runs a budget surplus. Which of the following is a likely macroeconomic effect?

• Increased national debt

• Rising inflation due to spending

• Withdrawal of money from the economy, slowing growth

• Higher transfer payments to low-income earners