Monetary Policy Quiz - CBSE Class 12 Economics
Free practice quiz: Monetary Policy (CBSE Class 12 Economics). 20 multiple-choice questions with answers and explanations. Play online, no sign-up needed.
Play all 20 questions freeSample questions
What is the primary objective of monetary policy?
- To control inflation
- To increase government revenue
- To regulate fiscal policy
- To influence trade balances
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Answer: A. To control inflation
The primary objective of monetary policy is to control inflation by managing the money supply and interest rates.
What is the effect of expansionary monetary policy?
- Decrease in GDP
- Increase in unemployment
- Increase in money supply
- Rise in taxes
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Answer: C. Increase in money supply
Expansionary monetary policy aims to increase the money supply to stimulate economic growth and decrease unemployment.
What is the Taylor Rule?
- A guideline for government spending
- A principle for setting interest rates based on inflation and output
- A method for calculating taxes
- A strategy for international trade
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Answer: B. A principle for setting interest rates based on inflation and output
The Taylor Rule is a formula that central banks use to help determine optimal interest rates based on economic conditions.
What does a strong currency imply for a country's exports?
- More competitive exports
- Less competitive exports
- No impact on exports
- Increase in export prices
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Answer: B. Less competitive exports
A strong currency makes a country’s goods more expensive for foreign buyers, thus making exports less competitive.
What impact do rising interest rates generally have on stock prices?
- Increase stock prices
- No effect on stock prices
- Decrease stock prices
- Only affect dividends
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Answer: C. Decrease stock prices
Rising interest rates can lead to a decrease in stock prices as they increase borrowing costs for companies and make fixed-income investment more appealing.