Answer Key (answer in red font)

1. Which of the following is NOT included in the basket of goods used to compute the Consumer Price Index
(CPI)?
A. Food and beverages C. Clothing and footwear
B. Housing D. Stocks and bonds

2. The CPI measures:

A. The change in the prices of all goods and services in the economy.
B. The change in the prices of a specific basket of goods and services consumed by households.
C. The change in the prices of all goods and services produced in the economy.
D. The change in the prices of goods and services exported by the economy.

3. Which of the following is NOT a step in the computation of the CPI?

A. Selection of the basket of goods and services
B. Measurement of the current prices of the goods and services in the basket
C. Calculation of the percentage change in the prices of the goods and services in the basket
D. Adjustment of the basket of goods and services to account for changes in consumer preferences

4. What is the obverse side of a coin?

A. The side of a coin with the country's coat of arms
B. The side of a coin with the portrait or image of a person
C. The side of a coin with the denomination and year of issue
D. The side of a coin with a design related to the country's history or culture

5. What was the name of the currency used during the Commonwealth era?
A. Philippine peso
B. US dollar
C. Japanese yen
D. Spanish real

6. Which of the following best describes the velocity of money?

A. The speed at which money moves through the economy.
B. The rate at which prices increase over time.
C. The amount of money that an individual has in their bank account.
D. The amount of money that a government spends on public goods.

7. Which of the following is an example of how an increase in the velocity of money can affect the economy?
A. A decrease in inflation rates.
B. A decrease in interest rates.
C. An increase in GDP.
D. A decrease in unemployment rates.

8. Which of the following is NOT a factor that influences the velocity of money?
A. Interest rates.
B. Government spending.
C. Consumer confidence.
D. The supply of money in the economy.

9. Which of the following is NOT one of the functions of money?

A. Medium of exchange
B. Store of value
C. Unit of account
D. Producer of goods

10. Which of the following is an example of money serving as a medium of exchange?

 A. An individual holding cash in a piggy bank
B. An individual using a check to make a purchase
C. An individual investing in a mutual fund
D. An individual holding a stock certificate

11. Which of the following best describes the relationship between the velocity of money and the money
supply?
A. They are inversely related.
B. They are directly related.
C. They have no relationship.
D. The relationship depends on the overall health of the economy.

12. What happens to the velocity of money when people start saving more?
A. It decreases.
B. It increases.
C. It stays the same.
D. It depends on the interest rate.

13. Which of the following is NOT a tool used by central banks to implement monetary policy?
A. Open market operations C. Reserve requirements
B. Fiscal policy D. Discount window lending

14. Which of the following is a factor that can influence the velocity of money?
A. The price of gold.
B. The exchange rate of the currency.
C. The level of government debt.
D. The ease of obtaining credit.

15. Which of the following best describes demand-pull inflation?

A. Inflation caused by an increase in production costs.
B. Inflation caused by an increase in demand for goods and services.
C. Inflation caused by a decrease in the supply of money.
D. Inflation caused by an increase in the velocity of money.

16. One way to curb inflation is to:

A. Increase government spending to stimulate the economy.

B. Increase taxes to reduce consumer spending.
C. Increase interest rates to reduce borrowing and spending.
D. Increase the money supply to encourage investment.

17. Which of the following best describes wage inflation?

A. Inflation caused by an increase in the cost of raw materials.
B. Inflation caused by an increase in the price of imports.
C. Inflation caused by an increase in wages.
D. Inflation caused by an increase in the value of the currency.

18. Which of the following is an example of hyperinflation?

A. An inflation rate of 2% per year.
B. An inflation rate of 3% per year.
C. An inflation rate of 20% per year.
D. An inflation rate of 100% per year.

19. Open market operations involve the central bank:

A. Buying or selling government securities to adjust the money supply.
B. Setting interest rates for loans made by commercial banks.
C. Regulating the amount of reserves banks are required to hold.
 D. Providing loans to banks at a discount rate.

20. Reserve requirements refer to:

A. The amount of money banks must hold in their vaults to cover deposits.
B. The amount of money banks are required to hold in reserve accounts at the central bank.
C. The interest rate charged by the central bank on loans to commercial banks.
D. The maximum interest rate that banks can charge on loans to customers.

21. Which of the following is an example of how a decrease in the velocity of money can affect inflation?
A. It can increase inflation.
B. It can decrease inflation.
C. It has no effect on inflation.
D. It depends on the overall health of the economy.

22. Why do economists focus on core inflation?

A. Because it is easier to measure than headline inflation
B.cause it is more stable and better reflects underlying inflation trends
B. Because it includes all goods and services, giving a more comprehensive picture of inflation
C. Because it is more sensitive to changes in monetary policy

23. What is core inflation?

A. Inflation caused by changes in the prices of food and energy
B. Inflation caused by changes in the prices of durable goods
C. Inflation caused by changes in the prices of non-food and non-energy goods and services
D. Inflation caused by changes in the prices of luxury goods

24. What is the tool used by the BSP to control the money supply in the economy?
A . open market operations
B. Fiscal policy
C. Foreign exchange operations
D. Trade policy

25. What is the primary mandate of the BSP?

A To promote economic growth and development
B. To maintain price stability
C. To ensure financial stability and consumer protection
D. To facilitate government borrowing