Monetary policy

What is the primary objective of monetary policy?

• To increase government spending

• To control inflation and stabilize the currency.

• To reduce unemployment through fiscal measures

• To balance the country budget

How does an increase in interest rates typically affect consumer spending?

• It increases consumer spending

• It has no effect on consumer spending

• It decreases consumer spending

• It leads to a proportional increase in consumer spending

What is the likely impact of a decrease in interest rates on the exchange rate?

• Appreciation of the domestic currency.

• Depreciation of the domestic currency.

• No change in the exchange rate.

• Immediate stabilization of the currency

Which of the following is a tool of monetary policy?

• Government subsidies.

• Taxation policies.

• Public infrastructure spending

• Open market operations

What effect does an increase in the money supply have on interest rates?

• Interest rates decrease

• Interest rates increase

• Interest rates remain unchanged

• Interest rates become volatile

How does a higher interest rate influence the level of investment in an economy?

• It encourages more investment

• It has no impact on investment

• It discourages investment

• It leads to a surge in speculative investments

What is the relationship between interest rates and inflation?

• Higher interest rates lead to higher inflation

• Lower interest rates lead to lower inflation

• Interest rates have no effect on inflation

• Higher interest rates can help reduce inflation

Which institution is primarily responsible for setting interest rates in the UK?

• The UK Treasury

• The London Stock Exchange

• The Bank of England

• The European Central Bank

What is the likely effect of a depreciated domestic currency on exports?

• Exports become more expensive

• Exports become cheaper and more competitive

• No change in export competitiveness

• Exports decrease due to higher prices

What is the term for the time lag between a change in monetary policy and its effect on the economy?

• Immediate impact

• Policy delay

• Transmission mechanism

• Adjustment period