This quiz works best with JavaScript enabled. Home > Economics > Monetary > Policy > Monetary Policy – Quiz 4 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Monetary Policy Quiz 4 (30 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. The money multiplier is the inverse of the ..... A) Discount rate. B) Required reserve rate (ratio). C) Federal funds rate. D) None of above. Show Answer Correct Answer: B) Required reserve rate (ratio). 2. Which of the following is not a purpose of the Federal Reserve? A) Provide financial services for the Federal Government. B) Prepare the Government Budget each year. C) Regulate financial institutions. D) Conduct Monetary Policy. Show Answer Correct Answer: B) Prepare the Government Budget each year. 3. Which of the following is not the work of RBI? A) Bank of the banks. B) Credit controller. C) Custodian of foreign currency. D) Allocating funds directly to the farmers for agricultural development. Show Answer Correct Answer: D) Allocating funds directly to the farmers for agricultural development. 4. Voting members of the FOMC include 7 members of the ..... and Presidents of the FRB. A) Senate. B) President's Council. C) Board of Governors. D) Financial Institution League. Show Answer Correct Answer: C) Board of Governors. 5. Which is not a potential problem of quantitative easing A) Inflation. B) Appreciating exchange rate. C) Bond bubble. D) Inequitable distribution of income. Show Answer Correct Answer: B) Appreciating exchange rate. 6. What are objects that have value and are also used as money? A) Fiat Money. B) Commodity Money. C) Electronic Money. D) Representative Money. Show Answer Correct Answer: B) Commodity Money. 7. What is the Federal Reserve System? A) Central bank. B) FOMC. C) FED. D) A bank like all others. Show Answer Correct Answer: A) Central bank. 8. Why did the U.S. government initiate a policy of more frequent intervention during the Great Depression? A) To dominate global trade. B) To prepare for a possible war. C) O strengthen local governments. D) To stabilize the economy. Show Answer Correct Answer: D) To stabilize the economy. 9. What does the MPC NOT consider when setting interest rates? A) Discretionary fiscal policy. B) Share prices and house prices. C) Growth of wages. D) GDP growth. Show Answer Correct Answer: A) Discretionary fiscal policy. 10. Which type of institution is responsible for conducting monetary policy? A) A multinational company. B) A trade union. C) A central bank. D) A commercial bank. Show Answer Correct Answer: C) A central bank. 11. Which Federal Reserve district do you live in? A) 6. B) 1. C) 12. D) 5. Show Answer Correct Answer: A) 6. 12. The portion of the Federal Reserve System that is primarily responsible for monetary policy. A) Board of Governors. B) District Banks. C) Federal Open Market Committee. D) Member banks. Show Answer Correct Answer: C) Federal Open Market Committee. 13. When banks take out loans with the Fed, this is called A) Interest on Reserves. B) Reserve Requirement. C) Discount Rate. D) Open Market Operations. Show Answer Correct Answer: C) Discount Rate. 14. Expansionary Monetary policies that increase the money supply are usually intended to: A) Maximize employment. B) Raise taxes. C) Cut debt. D) None of above. Show Answer Correct Answer: A) Maximize employment. 15. In what way is money NOT used? A) Keep a stored value. B) Increase/ decrease value. C) Determine value of goods/ services. D) Compares value of goods/ services. Show Answer Correct Answer: B) Increase/ decrease value. 16. What is Fractional Reserve Banking? A) When banks loan out all of their deposits and keep no reserves. B) When banks are required by the FED to hold a % of their deposits in reserve. C) When banks only have to hold a small % of their loans on hand. D) When banks specialize in fractions. Show Answer Correct Answer: B) When banks are required by the FED to hold a % of their deposits in reserve. 17. If Central Bank lower the discount rate, it would A) Limit money supply. B) Increase money supply. C) Money supply remain unchanged. D) None of above. Show Answer Correct Answer: B) Increase money supply. 18. An open market operation is an instrument of monetary policy which involves buying or selling of ..... from or to the public and banks A) Bonds and Other local securities. B) Debentures and Shares. C) Government Securities. D) None of These. Show Answer Correct Answer: C) Government Securities. 19. Which of the following is NOT a responsibility of the RBA? A) Printing Money. B) Regulating Banks. C) Lending money to civilians. D) Financial Literacy and security. Show Answer Correct Answer: C) Lending money to civilians. 20. Which of these is the correct definition of monetary policy: A) A policy that aims to control the supply of money in the economy. B) A policy that aims to contribute to the supply of money. C) A policy that aims to achieve economic growth. D) A policy that controls taxes. Show Answer Correct Answer: A) A policy that aims to control the supply of money in the economy. 21. Who is the current chair of the FED? A) Janet Yellen. B) Ben Bernanke. C) Allan Greenspan. D) Mr. Pips. Show Answer Correct Answer: A) Janet Yellen. 22. If the vale of the bond increases, ..... A) The yield falls. B) The yield remains unchanged. C) The yield increases. D) None of above. Show Answer Correct Answer: A) The yield falls. 23. The Federal Reserve has a dual mandate to promote A) Price stability & low taxes. B) Spending money & taxing citizens. C) Price instability & high unemployment. D) Price stability & full employment. Show Answer Correct Answer: D) Price stability & full employment. 24. How many Federal Reserve districts are included in the Federal Reserve System? A) 8. B) 12. C) 6. D) 10. Show Answer Correct Answer: B) 12. 25. In Christmasland candycanes of all sizes are used as currency. The reason this type of money serves its function as a medium of exchange is because it is A) Very portable. B) Highly divisible. C) Prized in foreign nations. D) Accepted as payment in exchange for goods and services. Show Answer Correct Answer: D) Accepted as payment in exchange for goods and services. 26. Business will invest more if A) Interest rate on loan is low. B) Expected return on investment is low. C) Interest rate on loan is high. D) None of above. Show Answer Correct Answer: A) Interest rate on loan is low. 27. What action does the FED take when it wants to lower interest rates? A) Increases GDP. B) It buys bonds. C) It sells bonds. D) Decreases GDP. Show Answer Correct Answer: B) It buys bonds. 28. ..... is a general rise in prices that can be caused by a number of things, but one of them is the amount of money that circulates: A) Inflation. B) Deflation. C) Foreclosure. D) None of above. Show Answer Correct Answer: A) Inflation. 29. In the money supply, what represents the cash held by the public and money deposited in checking accounts? A) M1. B) Store of value. C) M2. D) Liquidity. Show Answer Correct Answer: A) M1. 30. What happens to the equilibrium quantity of money (money supply-MS) and interest rates (i%) in the short term when the Fed sell bonds? A) Both increase. B) Money supply increases and interest rates decrease. C) Money supply decreases and interest rates increases. D) None of above. Show Answer Correct Answer: C) Money supply decreases and interest rates increases. ← PreviousNext →Related QuizzesMonetary QuizzesEconomics QuizzesMonetary Policy Quiz 1Monetary Policy Quiz 2Monetary Policy Quiz 3Monetary Policy Quiz 5Monetary Policy Quiz 6Monetary Policy Quiz 7Monetary Policy Quiz 8Monetary Policy Quiz 9 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books