Practice mode / Money, Interest Rates And Output What are the three main tools of monetary policy? A Option A: Coins, currency and demand deposits B Option B: Fiat, commodity and deposit money C Option C: The money supply, government purchases and taxation D Option D: Government expenditure, taxation and reserve requirements E Option E: Open market operations, reserve requirements and the refinancing rate Correct answer E. Open market operations, reserve requirements and the refinancing rate Explanation Central banks influence money and credit by buying and selling securities, setting required reserves and setting the rate at which they lend to banks. Show answer Report a problem Answer checked 11 October 2026 · How we write and check questions
Question 01 / Money, Interest Rates And Output What happens if there is a general shortage of liquidity in the money market? A Option A: The short-term interest rate at which the economy’s commercial banks lend to and borrow from each other will fall and the central bank may be expected to reduce the supply of liquidity to the banks B Option B: The banks will increase their lending C Option C: The short-term interest rate at which the economy’s commercial banks lend to and borrow from each other will rise and the central bank may be expected to increase the supply of liquidity to the banks. D Option D: The long-term interest rate in the economy will rise and the central bank will raise its interest rate in response E Option E: The short-term interest rate at which the economy’s commercial banks lend to and borrow from each other will rise and the long-term interest rate may be expected to rise as a result Correct answer C. The short-term interest rate at which the economy’s commercial banks lend to and borrow from each other will rise and the central bank may be expected to increase the supply of liquidity to the banks. Show answer Open question
Question 02 / Money, Interest Rates And Output What are government securities with a term of more than one year called? A Option A: Capital bills B Option B: Government bonds C Option C: Treasury bills D Option D: Bills of exchange Correct answer B. Government bonds Show answer Open question
Question 03 / Money, Interest Rates And Output What is the name for an item declared to be money that has no intrinsic worth? A Option A: Fiat money B Option B: Commodity money C Option C: Precious metals D Option D: Barter items Correct answer A. Fiat money Show answer Open question
Question 04 / Money, Interest Rates And Output Which of these is counted in broad money but not in narrow money? A Option A: Traveller’s cheques B Option B: Savings accounts C Option C: Currency held outside banks D Option D: Automatic-transfer savings accounts Correct answer B. Savings accounts Show answer Open question
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