Monetary Policy Quiz

What is the primary tool used by central banks to influence interest rates?

• Quantitative easing

• Discount rate

• Open market operations

• Fiscal policy

Which institution in the United States is responsible for conducting monetary policy?

• SEC

• World Bank

• Federal Reserve

• IMF

What is the term used to describe the buying and selling of government securities by the central bank?

• Open Market Operations

• Fiscal Policy

• Monetary Policy

• Quantitative Easing

What is the process by which the central bank increases the money supply by purchasing government securities?

• Open market operations

• Monetary tightening

• Quantitative easing

• Fiscal policy

What is the target rate of inflation typically set by central banks to maintain price stability?

• 5%

• 4%

• 2%

• 3%

How do central banks use interest rates to control inflation?

• Central banks adjust interest rates to influence borrowing and spending, which in turn affects inflation rates.

• Central banks adjust interest rates to influence exchange rates, which in turn affects inflation rates.

• Central banks adjust interest rates to influence government spending, which in turn affects inflation rates.

• Central banks adjust interest rates to influence stock market performance, which in turn affects inflation rates.

What is the name of the committee within the Federal Reserve that sets monetary policy?

• Federal Open Market Committee (FOMC)

• Federal Reserve Decision-Making Committee

• Central Bank Policy Group

• Monetary Policy Board

What is the term used to describe the process of increasing the money supply to stimulate economic growth?

• fiscal expansion

• monetary expansion

• monetary contraction

• economic contraction

What impact does lowering interest rates have on borrowing and spending in the economy?

• Lowering interest rates encourages borrowing and spending in the economy.

• Lowering interest rates leads to increased saving and reduced spending in the economy.

• Lowering interest rates discourages borrowing and spending in the economy.

• Lowering interest rates has no impact on borrowing and spending in the economy.

What is the main goal of quantitative easing as a monetary policy tool?

• To stabilize the economy by keeping the money supply constant and interest rates high.

• To slow down economic growth by limiting the money supply and increasing interest rates.

• To stimulate the economy by increasing the money supply, lowering interest rates, and encouraging lending and investment.

• To reduce inflation by decreasing the money supply and increasing interest rates.