Money Markets & Monetary Policy

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91. The term “deflation” refers to a situation where:
a. The general price level decreases over time
b. The general price level increases rapidly over time
c. The money supply increases rapidly over time
d. The money supply decreases over time

Answer: a
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92. The term “capital market union” refers to:
a. The integration of financial markets across different countries to facilitate cross-border investments
b. The integration of stock markets within a single country to enhance liquidity
c. The integration of money markets within a single country to reduce interest rate fluctuations
d. The integration of central banks within a single currency union to harmonize monetary policy

Answer: a
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93. The term “central bank reserves” refer to:
a. The assets held by commercial banks at the central bank
b. The assets held by the central bank to maintain stability in the financial system
c. The assets held by the government to finance fiscal deficits
d. The assets held by individuals at commercial banks

Answer: b
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94. The term “moral hazard” refers to:
a. The risk that individuals or institutions will take on excessive risks due to the expectation of being bailed out
b. The risk of inflation eroding the value of money over time
c. The risk of default on loans due to economic downturns
d. The risk of interest rate fluctuations impacting the profitability of financial institutions

Answer: a
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95. The term “monetary tightening” refers to a situation where:
a. The central bank reduces the money supply and increases interest rates
b. The central bank increases the money supply and reduces interest rates
c. The government reduces fiscal deficits and increases public spending
d. The government increases fiscal deficits and reduces public spending

Answer: a
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