Monetary and Fiscal Policy

Money and its Creation Process

When you deposit $1000 in a banking system where the reserve requirement is 35%, the maximum amount of money this deposit creates in the economy is closest to:

Money and its Creation Process

Match the following financial instruments to the ECB’s money definition:
(Drag and drop)

Demand and Supply of Money

Which of the following statements regard money demand and supply is most accurate?

Demand and Supply of Money

According to the theory of money neutrality, money supply growth only affects ______________ in the long run

Expected and Unexpected Inflation

According to the Fisher Effect,

Expected and Unexpected Inflation

According to the Fisher Effect, which of the following statements is LEAST accurate?

Which of the following is LEAST likely an effect of volatile unexpected inflation?

Roles and Desirable Qualities of the Central Bank

Which of the following reflects poorly on the central bank?

Monetary Policy

A central bank’s inflation target is 2%, and the long-term real growth rate of the economy is estimated to be 3%. If the central bank’s current policy rate is 4%, the monetary policy is most likely ___________.

Monetary Policy

A sharp rise in oil price caused prices to rise so fast that the economy entered a contraction. Which is the most appropriate action the central bank should do to bring bring down prices?

Limitations of Monetary Policy

Which of the following is most likely a valid assumption?

Fiscal Policy

The budget deficit for ConsumerLand for last year was $100 billion. This year, the budget deficit is $80 billion. The fiscal policy for the past was most likely:

Fiscal Policy

An economy is currently facing stagflation. Which is the most likely reason the government is hesitant to apply fiscal policy to address the problem?

Fiscal Policy Tools

HappyLand’s economy is at risk of overheating, so the government is looking to reduce aggregate demand by increasing tax collections by $5 billion for the next year. What is the potential decrease in aggregate demand if the country’s tax rate is 35%, and MPC is 80%?

Interaction Between Monetary and Fiscal Policy

An economist observed that the private sector’s share of the GDP has been contracting, but overall GDP output has been stable. This is most likely a result of: