<–2/”>a >Specially designed mock Quiz for Indian economy for the systematic coverage of PSC Exam prelims syllabus and practice.
History Free Mock Quiz has 30 questions. If any issue is observed with answer students may comment below
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The Federal Reserve System is the central bank of the United States. It was created by the Congress to provide the nation with a safer, more flexible, and more stable monetary and financial system. The Federal Reserve System conducts the nation’s Monetary Policy to promote maximum EMPLOYMENT, stable prices, and moderate long-term interest rates in the U.S. economy.
The Federal Reserve System is composed of three parts:
- The Board of Governors in Washington, D.C.
- The Federal Reserve Banks in cities throughout the nation
- The Federal Open Market Committee (FOMC)
The Board of Governors is made up of seven members who are appointed by the President and confirmed by the Senate. The Board of Governors is responsible for setting monetary policy, supervising and regulating banks, and providing financial Services to the U.S. government, U.S. financial institutions, and foreign official institutions.
The Federal Reserve Banks are located in cities throughout the nation. Each Federal Reserve Bank is responsible for implementing monetary policy, supervising and regulating banks, and providing financial services to the public.
The Federal Open Market Committee (FOMC) is made up of the seven members of the Board of Governors and five of the 12 Reserve Bank presidents. The FOMC meets eight times a year to set monetary policy.
Monetary policy is the actions taken by a central bank to influence the Money-supply-2/”>Money Supply and interest rates in an economy. The Federal Reserve System uses monetary policy to achieve its goals of maximum employment, stable prices, and moderate long-term interest rates.
The Federal Reserve System uses three tools to implement monetary policy: open market operations, reserve requirements, and the DISCOUNT rate.
Open market operations are the buying and selling of Government Securities by the Federal Reserve System. When the Federal Reserve buys government securities, it injects money into the economy. When the Federal Reserve sells government securities, it withdraws money from the economy.
Reserve requirements are the amount of money that banks are required to hold in reserve. When the Federal Reserve raises reserve requirements, it makes it more difficult for banks to lend money. When the Federal Reserve lowers reserve requirements, it makes it easier for banks to lend money.
The discount rate is the interest rate that the Federal Reserve charges banks for loans. When the Federal Reserve raises the discount rate, it makes it more expensive for banks to borrow money. When the Federal Reserve lowers the discount rate, it makes it cheaper for banks to borrow money.
Fiscal Policy is the use of government spending and Taxation to influence the economy. The government uses fiscal policy to achieve its goals of full employment, stable prices, and economic Growth.
The government can use fiscal policy to stimulate the economy by increasing spending or cutting taxes. The government can also use fiscal policy to slow down the economy by decreasing spending or raising taxes.
The Trade Deficit is the difference between the value of the goods and services that a country exports and the value of the goods and services that it imports. A trade deficit means that a country is importing more goods and services than it is exporting.
The national debt is the total amount of money that a country owes. The national debt is the result of the government borrowing money to finance its spending.
Inflation is a general increase in prices and fall in the purchasing value of money. Inflation is measured as a Percentage change in the Consumer Price Index (CPI), which is a measure of the prices of a basket of goods and services.
Unemployment is the percentage of the labor force that is unemployed. The labor force is the total number of people who are either employed or actively looking for work.
Economic growth is the increase in the amount of goods and services produced by an economy over time. Economic growth is measured as the percentage change in real gross domestic product (GDP), which is the market value of all Final Goods and services produced in an economy in a given year.
Economic Development is the process of improving the standard of living of a country’s people. Economic development is achieved through economic growth, but it also includes other factors such as Education, healthcare, and Infrastructure-2/”>INFRASTRUCTURE.
Globalization/”>Globalization-3/”>Globalization is the process of increasing economic integration between countries. Globalization is driven by the free flow of goods, services, capital, and labor across borders.
The Federal Reserve System, monetary policy, fiscal policy, the trade deficit, the national debt, inflation, unemployment, economic growth, economic development, and globalization are all important concepts in economics. These concepts are interrelated and affect each other in complex ways.
1. What is the difference between a Recession and a depression?
A recession is a period of time when the economy shrinks. This means that businesses are making less money, people are losing their jobs, and there is less spending overall. A depression is a much more severe recession. It is characterized by a sharp decline in economic activity, widespread unemployment, and Deflation.
2. What are the causes of recessions?
There are many different factors that can contribute to a recession. Some common causes include:
- Financial crises: A financial crisis can occur when there is a sudden loss of confidence in the financial system. This can lead to a run on banks, as people withdraw their money in fear that the banks will collapse.
- Asset bubbles: An asset bubble is a situation where the prices of assets, such as stocks or real estate, rise to unsustainable levels. When the bubble bursts, prices can fall sharply, leading to losses for investors and businesses.
- Economic shocks: An economic shock is an event that causes a sudden and unexpected change in the economy. Examples of economic shocks include natural disasters, wars, and terrorist attacks.
3. What are the effects of recessions?
Recessions can have a number of negative effects on the economy. Some of the most common effects include:
- Job losses: When businesses are making less money, they often lay off workers in order to cut costs. This can lead to high unemployment rates.
- Decreased spending: When people are worried about their jobs and their finances, they tend to spend less money. This can lead to a decrease in demand for goods and services, which can further hurt the economy.
- Business failures: When businesses are struggling to make money, some of them may be forced to close down. This can lead to job losses and a decrease in economic activity.
4. What are the policies that governments can use to address recessions?
There are a number of policies that governments can use to address recessions. Some of the most common policies include:
- Monetary policy: The central bank can use monetary policy to increase the money supply and lower interest rates. This can make it easier for businesses to borrow money and invest, which can help to stimulate the economy.
- Fiscal policy: The government can use fiscal policy to increase spending or cut taxes. This can put more money in the hands of consumers and businesses, which can help to boost demand and stimulate the economy.
- Supply-side policies: Supply-side policies are designed to increase the supply of goods and services in the economy. This can be done by reducing taxes, regulations, and other barriers to business activity.
5. What are the long-term effects of recessions?
The long-term effects of recessions can vary depending on the severity of the recession and the policies that are implemented to address it. In some cases, recessions can lead to long-term economic damage. This can happen if the recession is severe enough to cause a loss of confidence in the economy, which can lead to a decrease in Investment and innovation. In other cases, recessions can be a temporary setback that leads to a stronger economy in the long run. This can happen if the recession is used as an opportunity to implement reforms that make the economy more efficient and productive.
Economy Free Mock Quiz 3
The unemployment rate in the United States is currently 3.6%. This means that:
(A) 3.6% of the labor force is unemployed.
(B) 6.4% of the labor force is unemployed.
(C) 9.0% of the labor force is unemployed.
(D) 12.6% of the labor force is unemployed.The Federal Reserve is responsible for:
(A) setting interest rates.
(B) regulating banks.
(C) printing money.
(D) all of the above.The gross domestic product (GDP) is a measure of:
(A) the total value of goods and services produced in a country in a given year.
(B) the total income of all residents of a country in a given year.
(C) the total expenditure of all residents of a country in a given year.
(D) all of the above.The inflation rate is a measure of:
(A) the percentage change in the price level over time.
(B) the percentage change in the money supply over time.
(C) the percentage change in the unemployment rate over time.
(D) the percentage change in the GDP over time.The budget deficit is the difference between:
(A) government spending and government revenue.
(B) government revenue and government spending.
(C) the amount of money the government borrows and the amount of money it lends.
(D) the amount of money the government prints and the amount of money it destroys.The trade deficit is the difference between:
(A) the value of goods and services a country exports and the value of goods and services it imports.
(B) the value of goods and services a country imports and the value of goods and services it exports.
(C) the amount of money a country borrows from other countries and the amount of money it lends to other countries.
(D) the amount of money a country prints and the amount of money it destroys.The Current Account balance is the difference between:
(A) a country’s exports and imports of goods and services.
(B) a country’s exports and imports of capital.
(C) a country’s exports and imports of financial assets.
(D) all of the above.The Capital Account balance is the difference between:
(A) a country’s exports and imports of goods and services.
(B) a country’s exports and imports of capital.
(C) a country’s exports and imports of financial assets.
(D) all of the above.The financial account balance is the difference between:
(A) a country’s exports and imports of goods and services.
(B) a country’s exports and imports of capital.
(C) a country’s exports and imports of financial assets.
(D) all of the above.The Balance of Payments is a statement of all the economic transactions between a country and the rest of the world in a given period of time. It is divided into three main accounts: the current account, the capital account, and the financial account. The balance of payments must always balance, meaning that the sum of the current account balance, the capital account balance, and the financial account balance must be zero.
Answers
1. (A)
2. (D)
3. (A)
4. (A)
5. (A)
6. (A)
7. (A)
8. (B)
9. (C)
10. (T)