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Economics: Money, Credit, and Banking Quiz

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Economics: Money, Credit, and Banking Quiz

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Questions and Answers

Which of the following best describes the function of money in an economy?

A medium of exchange and store of value (correct)

A measure of inflation and a means of credit creation

A tool for government intervention and a source of economic inequality

A unit of account and a standard of deferred payments

What is the primary function of the central bank in relation to credit control?

Regulating stock markets and overseeing international trade agreements

Providing loans to commercial banks and promoting financial inclusion

Issuing currency and managing government revenue

Regulating interest rates and controlling money supply (correct)

In a fractional reserve banking system, what happens when a commercial bank makes a loan?

The money supply increases and the bank's reserves decrease (correct)

The money supply decreases and the bank's reserves increase

The loan is directly funded by the central bank to ensure liquidity

The government intervenes to regulate the loan terms and conditions

What is the impact of high levels of non-performing assets (NPAs) on a bank's financial stability?

Decreased capital adequacy and potential insolvency Signup and view all the answers

What is the significance of credit in an economy?

It facilitates economic activities by providing funds Signup and view all the answers

How does the central bank control credit in the economy?

By increasing interest rates Signup and view all the answers

What is the main function of money in an economy?

To facilitate exchange and serve as a store of value Signup and view all the answers

How does a fractional reserve banking system work when a commercial bank makes a loan?

It increases the money supply through credit creation Signup and view all the answers

What is the impact of globalization on national economies?

Increased competition and access to larger markets Signup and view all the answers

How does globalization affect cultural exchange?

Promotes cultural exchange and integration Signup and view all the answers

What role do multinational corporations play in globalization?

Facilitate international trade and investment Signup and view all the answers

How does globalization impact the movement of labor across borders?

Increases the movement of labor across borders Signup and view all the answers