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Questions and Answers
What is the primary function of money as stated in the text?
What is the primary function of money as stated in the text?
- Being a unit of foreign exchange
- Facilitating government transactions
- Acting as a medium of exchange (correct)
- Serving as a store of value
Which aggregates are included in the broader definitions of money supply such as M2 to M4?
Which aggregates are included in the broader definitions of money supply such as M2 to M4?
- Demand deposits only
- Time deposits
- Currency in circulation only
- A wider set of assets treated as money (correct)
What does expansionary monetary policy aim to do?
What does expansionary monetary policy aim to do?
- Reduce money supply
- Stabilize interest rates
- Increase money supply (correct)
- Control inflation rates
How can the central bank pursue a contractionary monetary policy according to the text?
How can the central bank pursue a contractionary monetary policy according to the text?
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What tool can the central bank use to adjust the money supply by reducing it?
What tool can the central bank use to adjust the money supply by reducing it?
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How can an increase in money supply affect prices according to the text?
How can an increase in money supply affect prices according to the text?
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