1. What is the definition of money?
A. A system of exchange pieces of metal
B. A medium of exchange that is widely accepted in transactions
C. A bartering system based on goods and services
D. A government-issued bond
ANSWER: B
2. What is the function of a central bank?
A. To regulate the stock market
B. To provide loans to consumers
C. To regulate the money supply and interest rates
D. To issue currency
ANSWER: C
3. Which of the following is an example of expansionary monetary policy?
A. Increasing taxes
B. Decreasing government spending
C. Increasing the money supply
D. Decreasing interest rates
ANSWER: C
4. What is the primary reason for the existence of banks and non-financial institutions?
A. To earn profits B
B. To provide financial services
C. To create employment opportunities
D. To fund government projects
ANSWER: B
5. Which of the following is NOT an economic role of banks and non-financial institutions?
A. Facilitating the flow of funds between savers and borrowers
B. Providing payment services
C. Creating money through lending
D. Conducting monetary policy
ANSWER: D
6. Which of the following best describes the rationale for the existence of banks and non-financial
institutions?
A. To generate revenue for the government
B. To provide loans to businesses and individuals
C. To create a stable financial system
D. To regulate the economy
ANSWER: C
7. Which of the following is the primary function of money?
A. Store of value
B. Medium of exchange
C. Unit of account
D. All of the above
ANSWER: B
8. Which of the following best describes the concept of money demand?
A. The total amount of money in circulation within an economy
B. The quantity of money that people are willing to hold at a given interest rate
C. The amount of money that the government needs to stimulate economic growth
D. The amount of money that banks lend to individuals and businesses
ANSWER: B
9. Which of the following is a determinant of money demand?
A. nterest rates
B. Inflation expectations
C. Income levels
D. All of the above
ANSWER: D
10. Which of the following is NOT a determinant of the money supply?
A. The reserve ratio
B. The discount rate
C. The federal funds rate
D. The required reserve ratio
ANSWER: C
11. Which of the following describes the role of central banks in the financial system?
A. Providing liquidity to the market
B. Enforcing regulations on banks
C. Managing inflation and interest rates
D. All of the above
ANSWER: D
12. How does the central bank manage inflation?
A. By raising interest rates
B. By lowering interest rates
C. By increasing the money supply
D. By decreasing the money supply
ANSWER: A
13. What effect would a central bank's decision to lower interest rates have on the economy?
A. Increased borrowing and economic growth
B. Decreased borrowing and economic growth
C. Increased borrowing and economic contraction
D. Decreased borrowing and economic contraction
ANSWER: A
14. Which of the following theories is most closely associated with Ethiopia's monetary policy?
A. Keynesian economics
B. Monetarism
C. Classical economics
D. Behavioral economics
ANSWER: B
15. What is the primary objective of Ethiopia's monetary policy?
A. Full employment
B. Price stability
C. Economic growth
D. Income equality
ANSWER: B
16. Which of the following is an example of a tool that Ethiopia's central bank might use to
implement monetary policy?
A. Fiscal stimulus
B. Tariffs and trade barriers
C. Open market operations
D. Industry subsidies
ANSWER: C
