Monetary Policy Quiz

What is monetary policy?

• The management of interest rates by businesses

• The process of borrowing money from banks

• The regulation of banks and control of the money supply

• The control of inflation through government spending

What is the role of banks in the economy?

• To control interest rates

• To regulate monetary policy

• To link borrowers with lenders

• To increase government spending

What is the purpose of analyzing risk before giving a loan?

• To prevent inflation

• To increase interest rates

• To decrease consumer spending

• To ensure the bank gets paid back

How do interest rates affect consumer spending?

• Interest rates only affect business spending

• Interest rates have no impact on consumer spending

• Lower interest rates decrease consumer spending

• Higher interest rates decrease consumer spending

What happens to business spending when interest rates are high?

• Businesses invest more and produce more

• Businesses invest less and produce less

• Businesses increase government spending

• Businesses will give out more loans

Who controls the money supply in the United States?

• The President

• The Treasury Department

• The World Bank

• The Federal Reserve

What is expansionary monetary policy?

• Decreasing interest rates to increase business spending

• Increasing interest rates to decrease consumer spending

• Increasing the money supply to stimulate the economy

• Decreasing the money supply to fight inflation

What is contractionary monetary policy?

• Increasing interest rates to increase business spending

• Decreasing interest rates to decrease consumer spending

• Decreasing the money supply to fight inflation

• Increasing the money supply to fight inflation

What are the two main weapons the government uses to fight high unemployment and high inflation?

• Interest rates and inflation

• Banks and lenders

• Monetary policy and fiscal policy

• Consumer spending and business spending