Master Monetary Economics: Online Quizzes and Learning Resources

Question 1

Monetary policy actions primarily affect the economy through the transmission mechanism. What is the initial channel through which monetary policy actions are transmitted?

Accepted Answer

Interest rates in the money market

Answer

Output in the short run

Answer

Price level in the long run

Answer

Government spending

Question 2

Which of the following is a characteristic of a fiat currency?

Accepted Answer

Its value is determined by government decree

Answer

It is backed by a physical commodity such as gold

Answer

Its value is determined by its intrinsic worth

Answer

It is primarily used in international transactions

Question 3

The opportunity cost of holding money is known as:

Accepted Answer

Interest foregone

Answer

Inflation risk

Answer

Seigniorage

Answer

Transaction costs

Question 4

Which of the following is a quantitative measure of money?

Accepted Answer

M1

Answer

Velocity

Answer

Inflation rate

Answer

Interest rate

Question 5

Which of the following is NOT a function of money as recognized in economics?

Accepted Answer

Incentive for labor

Answer

Medium of exchange

Answer

Store of value

Answer

Unit of account

Question 6

Expansionary monetary policy typically leads to:

Accepted Answer

Lower interest rates

Answer

Higher inflation

Answer

Increased unemployment

Answer

Lower economic growth

Question 7

Which of the following is a widely used measure of the overall level of prices in an economy?

Accepted Answer

Consumer Price Index (CPI)

Answer

Gross Domestic Product (GDP)

Answer

Monetary Policy Committee (MPC)

Answer

Phillips Curve

Question 8

Which of the following economic conditions is characterized by both high inflation and high unemployment?

Accepted Answer

Stagflation

Answer

Hyperinflation

Answer

Recession

Answer

Deflation

Question 9

A characteristic of the fractional reserve banking system is that:

Accepted Answer

Banks hold only a fraction of their deposits as reserves

Answer

The money supply is solely determined by the central bank

Answer

There is no risk of bank runs

Answer

Lending does not create new money

Question 10

The global financial crisis of 2007-2008 was primarily attributed to:

Accepted Answer

Subprime mortgage lending and its securitization

Answer

Lax monetary policy and excessive credit growth

Answer

Government overspending and fiscal imbalances

Answer

High inflation and rising interest rates

Question 11

The optimal level of inflation is generally considered to be:

Accepted Answer

A low positive level (e.g., 2%)

Answer

Zero

Answer

Unknown, as it depends on specific circumstances

Question 12

Name the relationship between inflation and unemployment.

Accepted Answer

Phillips Curve

Answer

Laffer Curve

Answer

Aggregate Production Function

Answer

IS-LM Model

Question 13

Which of the following is the primary objective of monetary policy in the United Kingdom, as defined by the Bank of England's mandate?

Accepted Answer

To maintain price stability

Answer

To promote economic growth

Answer

To reduce unemployment

Answer

To control the exchange rate

Question 14

The Bank of England is responsible for implementing monetary policy in the United Kingdom. Which of the following is NOT an instrument of monetary policy used by the Bank of England?

Accepted Answer

Fiscal policy

Answer

Open market operations

Answer

Changes in the bank rate

Answer

Quantitative easing

Question 15

The Phillips curve illustrates the relationship between:

Accepted Answer

Inflation and unemployment

Answer

Inflation and economic growth

Answer

Unemployment and economic growth

Answer

Interest rates and inflation

Question 16

Which of the following is NOT a factor that can shift the Phillips curve?

Accepted Answer

Changes in fiscal policy

Answer

Changes in technology

Answer

Changes in expectations

Answer

Changes in the natural rate of unemployment

Question 17

Which of the following is NOT a fundamental function of money?

Accepted Answer

Means of production

Answer

Medium of exchange

Answer

Store of value

Answer

Unit of account

Question 18

Which of the following is classified as a non-bank financial intermediary?

Accepted Answer

Insurance company

Answer

Commercial bank

Answer

Building society

Answer

Investment bank

Question 19

The Phillips curve graphically illustrates the relationship between:

Accepted Answer

Inflation and unemployment

Answer

Interest rates and economic growth

Answer

Fiscal policy and aggregate demand

Answer

Money supply and inflation

Question 20

Which of the following is NOT considered a tool of monetary policy?

Accepted Answer

Fiscal policy

Answer

Open market operations

Answer

Bank rate

Answer

Quantitative easing

Question 21

The Quantity Theory of Money posits that:

Accepted Answer

The money supply primarily determines the price level

Answer

The interest rate primarily determines the money supply

Answer

The money supply has no impact on the price level

Answer

The price level primarily determines the money supply

Question 22

The central bank responsible for managing the UK's monetary policy is the:

Accepted Answer

Bank of England

Answer

Federal Reserve

Answer

Bank of America

Answer

European Central Bank