Macro Economics 001

What would be the expected impact of a central bank decreasing the interest rate?

• Lower consumption

• Increased borrowing and investment

• Lower inflation immediately

• Currency appreciation

• Decreased money supply

A depreciation in a country’s currency will most likely:

• Lower exports

• Make imports cheaper

• Increase the trade deficit

• Boost exports due to cheaper domestic goods

• Have no effect on trade balance

If the carbon tax is increased, what is the likely effect on polluting industries?

• Increased profitability

• Greater output

• Incentive to innovate cleaner technologies

• Unchanged production levels

• Increase in carbon emissions

Which policy tool would a government use during a recession to stimulate demand?

• Increase in reserve ratio

• Increasing taxes

• Cutting government spending

• Expansionary fiscal policy

• Raising interest rates

A country joins a currency union. Which of the following is a limitation it might face?

• Access to larger markets

• Losing control of monetary policy

• Independent fiscal control

• Flexible exchange rates

• Ability to devalue its currency

What is the central bank’s role in maintaining inflation stability?

• Printing more money

• Setting government spending levels

• Adjusting interest rates

• Managing taxes

• Approving foreign investment

When inflation is persistently high, what is the appropriate monetary response?

• Lower interest rate

• Increase money supply

• Decrease taxes

• Raise the interest rate to reduce demand

• Subsidize consumption

If inequality rises sharply in a growing economy, what could be a long-term impact?

• Increase in overall welfare

• More inclusive growth

• Political instability and reduced growth potential

• Increased investment

• Lower government debt

What happens when the government introduces a digital central bank currency (CBDC)?

• Total decentralization of money

• Reduced transparency

• Increased transaction speed and financial inclusion

• More tax evasion

• Abolishment of banking system

A country wants to reduce reliance on fossil fuels. Which policy is most effective?

• Lower interest rates

• Increase subsidies for coal

• Introduce carbon pricing mechanisms

• Freeze green energy tariffs

• Increase fossil fuel imports