This quiz works best with JavaScript enabled. Home > Economics > Macroeconomics > Monetary And Fiscal Policy > Monetary And Fiscal Policy – Quiz 4 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Monetary And Fiscal Policy Quiz 4 (20 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. When money demand is expressed in a graph with the interest rate on the vertical axis and the quantity of money on the horizontal axis, an increase in the interest rate A) Decreases the quantity demanded of money. B) Increases the quantity demanded of money. C) Decreases the demand for money. D) Increases the demand for money. Show Answer Correct Answer: A) Decreases the quantity demanded of money. 2. The Federal Reserve System is ..... A) The source of most tax revenue in the U.S. B) An organization with no real power to affect the economy. C) Owned and operated by Congress. D) The central bank of the United States. Show Answer Correct Answer: D) The central bank of the United States. 3. When government spending is more than the taxes collected is known as A) Deficit spending. B) Budget surplus. C) Inflation. D) Interest Rates. Show Answer Correct Answer: A) Deficit spending. 4. Keynes's liquidity preference theory of the interest rate suggests that the interest rate is determined by A) Aggregate supply and aggregate demand. B) The supply and demand for loanable funds. C) The supply and demand for money. D) The supply and demand for labour. Show Answer Correct Answer: C) The supply and demand for money. 5. Federal Reserve lowers interest rates and buys bonds. What occurs? A) Money Supply increases and Number of loans increase. B) Money Supply increases and Number of loans decrease. C) Money Supply decreases and Number of loans increase. D) Money Supply does not change and Number of loans decrease. Show Answer Correct Answer: A) Money Supply increases and Number of loans increase. 6. Who owns our money? A) We, the people. B) Legal citizens. C) The President. D) Our government. Show Answer Correct Answer: D) Our government. 7. When the Federal Government increases spending ..... A) Unemployment:Increases, GDP:Increases. B) Unemployment:Increases, GDP:Decrease. C) Unemployment:Decreases, GDP:Increases. D) Unemployment:Decreases, GDP:Decreases. Show Answer Correct Answer: C) Unemployment:Decreases, GDP:Increases. 8. How would the Federal Reserve stimulate the United States economy and reduce unemployment? A) Increase consumer spending by reducing the money supply. B) Increase the discount rate it charges banks, which would increase the money supply. C) Decrease interest rates because low interest rates encourage business growth and expansion. D) Increase interest rates because high interest rates encourage business growth and expansion. Show Answer Correct Answer: C) Decrease interest rates because low interest rates encourage business growth and expansion. 9. What is one function of Federal Reserve? A) The Bank for the U.S Treasury. B) Issuing Currency. C) Both A & B. D) None of the above. Show Answer Correct Answer: C) Both A & B. 10. The initial effect of an increase in the money supply is to A) Increase the interest rate. B) Increase the price level. C) Decrease the price level. D) Decrease the interest rate. Show Answer Correct Answer: D) Decrease the interest rate. 11. When would Congress most likely use contractionary fiscal policy? A) During periods of high inflation. B) During periods of low economic production. C) During periods of peace. D) None of above. Show Answer Correct Answer: A) During periods of high inflation. 12. Why does the government sometimes use an expansionary fiscal policy? A) To encourage GDP growth & prevent a recession. B) To expand the govt's control over non-defense spending. C) To control demand fro consumer goods & services. D) To slow down the economy so demand doesn't exceed supply. Show Answer Correct Answer: A) To encourage GDP growth & prevent a recession. 13. Money must be able to withstand the wear and tear of people using it A) Divisible. B) Durable. C) Scarce. D) Portable. Show Answer Correct Answer: B) Durable. 14. What are the three main tools the central bank uses in carrying out monetary policy? A) Open market operations, discount rate, and government spending. B) Open market operations, discount rate, and income tax rates. C) Income tax rates, reserve requirement, and government spending. D) Open market operations, discount rate, and reserve requirement. Show Answer Correct Answer: D) Open market operations, discount rate, and reserve requirement. 15. What market structure sells similar products? A) Perfect competition. B) Monopolistic competition. C) Oligopoly. D) Monopoly. Show Answer Correct Answer: B) Monopolistic competition. 16. International trade activities and the problems occured. A) Microeconomics. B) Macroeconomics. Show Answer Correct Answer: B) Macroeconomics. 17. Monetary policy decisions are made by: A) Congress. B) Senate. C) The Fed. D) President. Show Answer Correct Answer: C) The Fed. 18. When a government spends more than it takes in A) Budget surplus. B) Inflation. C) Budget Deficit. D) None of above. Show Answer Correct Answer: C) Budget Deficit. 19. What is the purpose of the bank reserve requirement? A) To prevent catastrophic bank runs. B) To control inflation. C) To encourage full employment. D) To regulate interest rates. Show Answer Correct Answer: A) To prevent catastrophic bank runs. 20. Which policy is the following statement associated with? "Several ..... policymakers recently have suggested that they're inclined to support more bond purchases if the ..... economy doesn't pick up." A) Monetary Policy. B) Fiscal Policy. C) Both Monetary and Fiscal Policy. D) None of above. Show Answer Correct Answer: A) Monetary Policy. ← PreviousNext →Related QuizzesMacroeconomics QuizzesEconomics QuizzesMonetary And Fiscal Policy Quiz 1Monetary And Fiscal Policy Quiz 2Monetary And Fiscal Policy Quiz 3Monetary And Fiscal Policy Quiz 5Monetary And Fiscal Policy Quiz 6Monetary And Fiscal Policy Quiz 7Monetary And Fiscal Policy Quiz 8Monetary And Fiscal Policy Quiz 9 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books