POF5

Which group sets monetary policy in the United States?

• Federal Reserve System

• Congress

• The President

• U.S. Treasury

What is the primary responsibility of the U.S. Treasury?

• Setting fiscal policy

• Conducting debt management policy

• Maintaining price stability

• Managing economic growth

What is the main objective of the European Central Bank?

• Maintaining price stability

• Promoting economic growth

• Ensuring high employment

• Balancing international transactions

How does the government influence economic activity through fiscal policy?

• By borrowing from other countries

• By levying taxes

• By printing money for its own use

• By increasing interest rates

What is the purpose of automatic stabilizers in fiscal policy?

• To increase government spending

• To stabilize economic activity

• To reduce taxes during recessions

• To encourage private investment

What is the impact of deficit financing on the economy?

• Stabilizes prices

• Reduces government spending

• Increases private borrowing

• Leads to crowding out

What is the equation for the money multiplier in a simple monetary system?

• MB x M1 = M

• 1 + k / r(1 + t + g) + k

• 1 / Reserve Ratio

• MB x M = M1

What is the purpose of the monetary base in the banking system?

• To determine government spending

• To measure total reserves

• To calculate the money multiplier

• To regulate interest rates

How does the velocity of money affect the economy?

• It determines the money supply

• It controls interest rates

• It influences inflation rates

• It impacts GDP growth

What is the relationship between money supply and gross domestic product?

• Money supply is independent of GDP

• Money supply is linked to GDP via velocity

• Velocity of money affects inflation

• Nominal GDP equals real GDP