Copyright

The Central Bank & Monetary Policy Chapter Exam

Exam Instructions:

Choose your answers to the questions and click 'Next' to see the next set of questions. You can skip questions if you would like and come back to them later with the yellow "Go To First Skipped Question" button. When you have completed the practice exam, a green submit button will appear. Click it to see your results. Good luck!

Page 1

Question 1 1. In order to adjust a nominal interest rate for inflation, which of the following formula should be used?

Question 2 2. The real interest rate for a consumer loan is 5%, and the expected inflation rate is 3%. What is the nominal interest rate on this consumer loan?

Question 3 3. Which of the following is FALSE regarding real interest rates?

Question 4 4. A money market account at the bank offers a 4% nominal interest rate, while inflation is expected to be 3%. What is the real interest rate for this account?

Question 5 5. In the country of Athenia, banks charge 10% interest on all loans. If the general price level has been increasing at a rate of 2% per year, what is the real rate of interest in Athenia?

Page 2

Question 6 6. If the Federal Reserve suddenly decreases the growth rate of the money supply from 6% to 4% per year, what is likely to happen to aggregate demand and real Gross Domestic Product in the short-run?

Question 7 7. How would economists graphically illustrate a decrease in the money supply?

Question 8 8. The Fed's monetary policy has the greatest positive effect on real Gross Domestic Product under what set of conditions?

Question 9 9. How does an increase in the money supply impact economic output within the US economy?

Question 10 10. If all other factors remain equal, what would happen to interest rates when the amount of money circulating in the economy is increased?

Page 3

Question 11 11. What's hyperinflation?

Question 12 12. If a country has a money supply of 20 billion dollars, a real GDP of 100 billion dollars, and a price level of 1, then what's the velocity of money in this country?

Question 13 13. Economists use the _____ to explain the link between inflation and the money supply.

Question 14 14. How can government overspending cause hyperinflation?

Question 15 15. Hyperinflation is usually associated with:

Page 4

Question 16 16. The Federal Reserve achieves its monetary goals by doing which of the following?

Question 17 17. Why does the Federal Reserve require commercial banks to maintain reserves with them?

Question 18 18. Which of the following is an inaccurate description of The Federal Reserve?

Question 19 19. Which of the following is FALSE regarding the Federal Reserve?

Question 20 20. What are some of the objectives of the Fed?

The Central Bank & Monetary Policy Chapter Exam Instructions

Choose your answers to the questions and click 'Next' to see the next set of questions. You can skip questions if you would like and come back to them later with the yellow "Go To First Skipped Question" button. When you have completed the practice exam, a green submit button will appear. Click it to see your results. Good luck!

Praxis Social Studies - Content Knowledge (5081): Study Guide & Practice  /  History Courses
Support