1. Directions

You will read passages on the topic and then answer questions about them. You may find vocabulary at the end of the test. Read the questions carefully before choosing the correct answers.

2. Questions of the test

Question 1. What are the two main goals of monetary policy?
A) Maintaining price stability and achieving full employment
B) Increasing GDP and reducing unemployment
C) Reducing inflation and increasing GDP
D) Reducing the budget deficit and increasing exports

Question 2. Which of the following is NOT a tool used by central banks to implement monetary policy?
A) Open market operations
B) Taxation
C) Discount window lending
D) Reserve requirements

Question 3. What is the effect of the central bank increasing the target interest rate?
A) It becomes cheaper for borrowers to take out loans
B) It becomes more expensive for borrowers to take out loans
C) It increases the demand for credit
D) It reduces the demand for credit

Question 4. How can monetary policy be used to address deflation?
A) By lowering interest rates or increasing the money supply
B) By raising interest rates or decreasing the money supply
C) By decreasing government spending or increasing taxes
D) By increasing government spending or decreasing taxes

Question 5. Which of the following is NOT a tool used by governments to influence the economy?
A) Monetary policy
B) Fiscal policy
C) Regulatory policy
D) Trade policy