Macroeconomics: Prep

Question 1: What is the function of central banks in the monetary system?

• To regulate fiscal policy

• To control inflation

• To regulate the money supply and manage interest rates

• To supervise international trade

Question 2: Which of the following is an example of fiat money?

• Gold

• Silver

• Bitcoin

• Barter items

Question 3: When a commercial bank gives out loans, what happens to the money supply?

• It increases

• It decreases

• It remains unchanged

• It fluctuates

Question 4: What is the reserve requirement?

• The interest rate set by the Federal Reserve
  

• The minimum percentage of deposits that banks must keep on hand
  

• The maximum percentage of deposits that banks can lend out
  

• The percentage of government bonds held by commercial banks

  
  

Question 5: Which of the following tools is used by central banks to influence the money supply?

• Open market operations

• Taxation

• Public spending

• Trade policies

Money Growth, Inflation, and Classical Theory

Question 1: How is the term "inflation" best defined?

• An increase in the price of a specific good or service

• A decrease in the money supply

• A sustained increase in the general price level of goods and services in an economy

• A rise in GDP

Question 2: According to the Quantity Theory of Money, what is the relationship between the money supply and inflation?

• Inverse relationship

• No relationship

• Direct relationship

• Non-linear relationship

Question 3: What is the primary cause of inflation according to the classical theory of inflation?

• Excessive government spending

• Increase in aggregate demand exceeding supply

• Expansionary monetary policy

• Technological advancements

Question 4: Which of the following is a consequence of hyperinflation?

• Decrease in unemployment

• Increase in the value of money

• Economic instability

• Increase in savings

Question 5: What role does the Phillips curve play in understanding inflation and unemployment?

• It shows an inverse relationship between inflation and unemployment

• It depicts a direct relationship between inflation and unemployment

• It indicates that there's no relationship between inflation and unemployment

• It predicts the rate of deflation in an economy