This quiz works best with JavaScript enabled. Home > Economics > Monetary > Policy > Monetary Policy – Quiz 3 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Monetary Policy Quiz 3 (30 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. Which action would most likely increase the excess reserves of commercial banks? A) A central bank sells bond to the public. B) A central bank sells bonds to commercial banks. C) The central bank buys bond from commercial banks. D) The board of governors increases the discount rate. Show Answer Correct Answer: C) The central bank buys bond from commercial banks. 2. If you want to slow down the economy, the Fed can ..... the money supply by ..... interest rates. A) Decrease, increasing. B) Increase, decreasing. C) Increase, increase. D) Maintain, maintain. Show Answer Correct Answer: A) Decrease, increasing. 3. What does each dollar bill have to show that its not fake? A) Serial Number. B) An animal. C) A President. D) A Place. Show Answer Correct Answer: A) Serial Number. 4. What is the generally the most important role of the Federal Reserve performs? A) Distribution of currency to banks. B) Check clearing operations. C) Overseeing monetary policy. D) None of above. Show Answer Correct Answer: C) Overseeing monetary policy. 5. What do we call the funds that the banks keep with RBI as a portion of their Net Demand and Time Liabilities? A) Cash Reserve Ratio. B) Bank Rate Reverse. C) Repo Rate. D) Statutory Liquidity Ratio. Show Answer Correct Answer: A) Cash Reserve Ratio. 6. The main objective of monetary policy in India is ..... : A) Growth with Stability. B) Reduce Poverty and Achieve Stability. C) Overall Monetary Stability. D) None of These. Show Answer Correct Answer: A) Growth with Stability. 7. During inflationary period, central bank will use A) Expansionary monetary policy. B) Contractionary monetary policy. C) Supply side policy. D) None of above. Show Answer Correct Answer: B) Contractionary monetary policy. 8. What is the goal of contractionary monetary policy? A) To decrease the money supply to slow down the economy. B) To increase the money supply to grow the economy. C) To increase the money supply to slow down the economy. D) The decrease the money supply to grow the economy. Show Answer Correct Answer: A) To decrease the money supply to slow down the economy. 9. What does the FED NOT do? A) Sets & controls budget. B) Buys/ sells bonds. C) Controls interest rates. D) Regulates commercial banks. Show Answer Correct Answer: A) Sets & controls budget. 10. Which of the following is not a goal of fiscal and monetary policy? A) Price Stability. B) Full employment. C) Investment in human capital. D) Economic Growth. Show Answer Correct Answer: C) Investment in human capital. 11. What happens to the money circulation, when the FED orders a tight/ contractionary money policy? A) Circulation stays the same. B) Less money is put into circulation. C) Interest rates rise. D) More money is put out into circulation. Show Answer Correct Answer: B) Less money is put into circulation. 12. What is Price stability A) The BSP's primary mandate. B) Refers to low and stable inflation. C) Preserves purchasing power. D) All of the above. Show Answer Correct Answer: D) All of the above. 13. Which of the following is NOT one of the three parts of the Federal Reserve? A) The Federal Open Market Committee. B) The Board of Governors. C) The Consumer Financial Protection Bureau. D) The reserve banks. Show Answer Correct Answer: C) The Consumer Financial Protection Bureau. 14. What happens to interest rates under a easy money policy? A) Disappear. B) Stay the same. C) Increase. D) Decrease. Show Answer Correct Answer: D) Decrease. 15. "The Fed" is the nickname for the: A) Federal government. B) Federal Bureau of Investigation. C) Jimmy "The Fed" Federico. D) Federal Reserve Bank of the United States. Show Answer Correct Answer: D) Federal Reserve Bank of the United States. 16. Finish the statement:Monetary policy affects the ....., primarily through changing ..... A) Interest rates, reserve requirement. B) Budget, fiscal policy. C) Federal Reserve, printing money. D) Money supply, interest rates. Show Answer Correct Answer: D) Money supply, interest rates. 17. How many districts (and, therefore, regional reserve banks) make up the Federal Reserve system? A) 5. B) 12. C) 10. D) 15. Show Answer Correct Answer: B) 12. 18. If the Fed institutes a policy to reduce inflation, which of the following is most likely to increase? A) Investment. B) Tax rates. C) Government deficits. D) Interest rates. Show Answer Correct Answer: D) Interest rates. 19. It is the interest rate that banks charge each other for short term loans A) Discount rate. B) Prime rate. C) Federal Funds Rate. D) None of above. Show Answer Correct Answer: C) Federal Funds Rate. 20. The Federal Reserve will lower reserve requirement, lower the discount rate and buys bonds when? A) They want to impact a Presidential election. B) The economy needs to expand. C) They are getting ready to issue currency. D) None of above. Show Answer Correct Answer: B) The economy needs to expand. 21. The primary concern with using a tight money policy would be: A) Slowing economic growth or increasing unemployment. B) Inflation. C) High prices. D) None of above. Show Answer Correct Answer: A) Slowing economic growth or increasing unemployment. 22. Cash Reserve Ratio increases the cash for ..... : A) Lending. B) Borrowing. C) Mortgaging. D) None of These. Show Answer Correct Answer: A) Lending. 23. Fee charged by the Federal Reserve Bank for member banks to borrow money from the FED (hint:@ a reduced rate)? A) Discount rate. B) Inflation. C) Interest. D) Reserve requirement. Show Answer Correct Answer: A) Discount rate. 24. Which of these is a quantitative instrument of Monetary Policy? A) REPO. B) CRR. C) SLR. D) All the Above. Show Answer Correct Answer: D) All the Above. 25. A liquidity trap occurs when ..... fail to stimulate consumption. MP becomes ineffective. A) Low or zero interest rates. B) Low interest rates. C) Zero interest rates. D) None of above. Show Answer Correct Answer: A) Low or zero interest rates. 26. To fix the demand-pull inflation, the FED would ..... A) Lower taxes. B) Use tight money. C) Use easy money. D) Raise taxes. Show Answer Correct Answer: B) Use tight money. 27. Who votes at FOMC meetings? A) The members of the Board of Governors. B) Presidents of 5 Federal Reserve Banks. C) Presidents of all 12 Federal Reserve Banks. D) Both members of the Board and Presidents of the 5 Banks. Show Answer Correct Answer: D) Both members of the Board and Presidents of the 5 Banks. 28. When a nation imports more than it exports, economists say it has which of the following? A) A trade surplus. B) Trade deficit. C) A positive balance of trade. D) A national trade difference. Show Answer Correct Answer: B) Trade deficit. 29. The FED would want to increase the money supply during a recession (contraction) because of the increasingly higher unemployment rate. This would help to achieve what monetary policy goal? A) (Maximum Employment) Full Employment. B) Price Stability. C) Moderate interest rates. D) None of above. Show Answer Correct Answer: A) (Maximum Employment) Full Employment. 30. ..... controls the supply of money and bank credit: A) RBI. B) Indian Banking Association. C) SEBI. D) None of These. Show Answer Correct Answer: A) RBI. ← PreviousNext →Related QuizzesMonetary QuizzesEconomics QuizzesMonetary Policy Quiz 1Monetary Policy Quiz 2Monetary Policy Quiz 4Monetary Policy Quiz 5Monetary Policy Quiz 6Monetary Policy Quiz 7Monetary Policy Quiz 8Monetary Policy Quiz 9 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books