Economics MCQs : Introduction & Basics of Economics : Economics MCQs
1. Economics is the study of:
a) The allocation of scarce resources to fulfill unlimited wants and needs.
b) The accumulation of wealth in a society.
c) The management of government finances.
d) The distribution of goods and services among countries.
Answer: a) The allocation of scarce resources to fulfill unlimited wants and needs.
2. Which of the following is NOT considered a scarce resource in economics?
a) Time
b) Money
c) Labor
d) Air
Answer: d) Air
3. The fundamental problem of economics is:
a) How to maximize profits for businesses.
b) How to allocate unlimited resources to satisfy unlimited wants.
c) How to minimize the production of goods and services.
d) How to distribute wealth equally among individuals.
Answer: b) How to allocate unlimited resources to satisfy unlimited wants.
4. Opportunity cost is best defined as:
a) The explicit cost of a decision.
b) The monetary value of all the alternatives available.
c) The highest-valued alternative forgone when a decision is made.
d) The cost of production for a good or service.
Answer: c) The highest-valued alternative forgone when a decision is made.
5. Which of the following is a microeconomic question?
a) How does the overall price level impact the economy?
b) What is the impact of government spending on national output?
c) How do consumers’ preferences affect the demand for a specific product?
d) How does international trade affect a country’s economic growth?
Answer: c) How do consumers’ preferences affect the demand for a specific product?
6. Macroeconomics primarily focuses on:
a) Individual consumer behavior.
b) The behavior of individual firms.
c) The overall performance of the economy.
d) The determination of prices in specific markets.
Answer: c) The overall performance of the economy.
7. In economics, “ceteris paribus” means:
a) “All things considered.”
b) “Supply and demand.”
c) “Consumer surplus.”
d) “Unlimited wants and needs.”
Answer: a) “All things considered.”
8. Which of the following statements best represents the concept of “utility” in economics?
a) Utility is the total revenue generated by a firm.
b) Utility is the total cost incurred by a firm.
c) Utility refers to the satisfaction or happiness derived from consuming goods and services.
d) Utility refers to the total profit earned by a firm.
Answer: c) Utility refers to the satisfaction or happiness derived from consuming goods and services.
9. “Guns or butter” is a classic economic example used to illustrate the concept of:
a) Scarcity
b) Opportunity cost
c) Comparative advantage
d) Production possibilities frontier
Answer: b) Opportunity cost
10. Which of the following is NOT a factor of production in economics?
a) Land
b) Labor
c) Money
d) Capital
Answer: c) Money
11. The study of how individuals and societies make choices about the production, consumption, and distribution of goods and services is known as:
a) Sociology
b) Psychology
c) Economics
d) Anthropology
Answer: c) Economics
12. Which of the following best describes the law of demand?
a) As the price of a good increases, the quantity demanded increases.
b) As the price of a good decreases, the quantity demanded decreases.
c) As the price of a good increases, the quantity demanded decreases.
d) As the price of a good decreases, the quantity demanded increases.
Answer: d) As the price of a good decreases, the quantity demanded increases.
13. The measure of responsiveness of quantity demanded to a change in price is known as:
a) Elasticity of demand
b) Marginal utility
c) Opportunity cost
d) Cross-price elasticity
Answer: a) Elasticity of demand
14. When price and quantity demanded have a direct relationship, the demand curve is:
a) Upward-sloping
b) Downward-sloping
c) Horizontal
d) Vertical
Answer: a) Upward-sloping
15. A government-imposed maximum price that is below the equilibrium price is called:
a) Price floor
b) Price ceiling
c) Surplus
d) Subsidy
Answer: b) Price ceiling
16. The total revenue of a firm is calculated as:
a) Price multiplied by quantity sold
b) Price divided by quantity sold
c) Quantity sold divided by price
d) Quantity sold minus price
Answer: a) Price multiplied by quantity sold
17. In the short run, a firm in a perfectly competitive market will shut down if price falls below:
a) Average variable cost
b) Average total cost
c) Marginal cost
d) Average fixed cost
Answer: a) Average variable cost
18. The Consumer Price Index (CPI) measures changes in the prices of a basket of goods and services purchased by:
a) Producers
b) The government
c) Consumers
d) Investors
Answer: c) Consumers
19. Fiscal policy refers to the use of government spending and taxation to:
a) Control inflation
b) Stabilize the economy
c) Regulate the money supply
d) Encourage exports
Answer: b) Stabilize the economy
20. The natural rate of unemployment is:
a) The unemployment rate that exists when the economy is operating at full employment.
b) The unemployment rate that exists during periods of economic recession.
c) The unemployment rate that exists when there is no frictional unemployment.
d) The unemployment rate that exists when the money supply is stable.
Answer: a) The unemployment rate that exists when the economy is operating at full employment.
21. When the actual inflation rate is lower than expected inflation, who benefits the most?
a) Borrowers
b) Lenders
c) Workers
d) Retirees
Answer: a) Borrowers
22. The Phillips curve shows the relationship between:
a) Inflation and unemployment
b) Inflation and interest rates
c) GDP and unemployment
d) GDP and inflation
Answer: a) Inflation and unemployment
23. The central bank’s primary tool for conducting monetary policy is:
a) Fiscal policy
b) Open market operations
c) Import tariffs
d) Subsidies
Answer: b) Open market operations
24. The Lorenz curve is used to illustrate:
a) The relationship between inflation and unemployment.
b) The income distribution in an economy.
c) The behavior of individual firms in a competitive market.
d) The concept of opportunity cost.
Answer: b) The income distribution in an economy.
25. The term “comparative advantage” is used to describe a situation in which a country can produce a good at a lower:
a) Opportunity cost than other countries.
b) Monetary cost than other countries.
c) Average cost than other countries.
d) Total cost than other countries.
Answer: a) Opportunity cost than other countries.
26. Which of the following is NOT a function of money in an economy?
a) Medium of exchange
b) Store of value
c) Unit of production
d) Unit of account
Answer: c) Unit of production
27. The concept of “time value of money” suggests that:
a) Money has the same value
at all points in time.
b) Money invested today will always be worth less than the same amount received in the future.
c) Money invested today will always be worth more than the same amount received in the future.
d) Money has no value over time.
Answer: c) Money invested today will always be worth more than the same amount received in the future.
28. Which of the following statements about economic systems is correct?
a) In a command economy, resources are allocated based on market forces.
b) In a market economy, the government determines the prices of goods and services.
c) In a mixed economy, all economic decisions are made by the government.
d) In a traditional economy, resources are allocated based on customs and traditions.
Answer: d) In a traditional economy, resources are allocated based on customs and traditions.
29. Gross Domestic Product (GDP) is a measure of:
a) The total income of a country’s citizens.
b) The total value of all goods and services produced within a country’s borders in a given period.
c) The total value of all goods and services consumed by a country’s citizens.
d) The total value of a country’s exports minus imports.
Answer: b) The total value of all goods and services produced within a country’s borders in a given period.
30. Which of the following is NOT a component of GDP?
a) Consumption
b) Investment
c) Government spending
d) Trade balance
Answer: d) Trade balance
31. The circular flow model of the economy shows:
a) The flow of goods and services but not the flow of money.
b) The flow of money but not the flow of goods and services.
c) The flow of goods and services and the flow of money.
d) Neither the flow of goods and services nor the flow of money.
Answer: c) The flow of goods and services and the flow of money.
32. Which of the following is an example of a positive economic statement?
a) The government should reduce taxes to stimulate economic growth.
b) The unemployment rate is 5%.
c) Inflation is too high, and it is hurting the economy.
d) Pollution is a major problem, and the government should take action.
Answer: b) The unemployment rate is 5%.
33. Normative economics deals with:
a) Describing how the economy operates.
b) Making value judgments and recommending policies.
c) Analyzing historical economic data.
d) Predicting future economic trends.
Answer: b) Making value judgments and recommending policies.
34. Which of the following best defines the production possibilities frontier (PPF)?
a) A curve that shows the maximum combination of two goods a country can produce with its available resources.
b) A curve that shows the price of goods and services in the market.
c) A curve that shows the total revenue of a firm at different levels of production.
d) A curve that shows the relationship between inflation and unemployment.
Answer: a) A curve that shows the maximum combination of two goods a country can produce with its available resources.
35. When a country specializes in producing a good or service in which it has a comparative advantage, it can benefit from:
a) Lower opportunity costs of production.
b) Higher prices in the international market.
c) Higher tariffs imposed on imports.
d) Lower demand for its exports.
Answer: a) Lower opportunity costs of production.
36. The law of supply states that, all else being equal:
a) As the price of a good increases, the quantity supplied increases.
b) As the price of a good decreases, the quantity supplied decreases.
c) As the price of a good increases, the quantity supplied decreases.
d) As the price of a good decreases, the quantity supplied increases.
Answer: a) As the price of a good increases, the quantity supplied increases.
37. Which of the following is NOT a determinant of supply?
a) Technology
b) Cost of production
c) Consumer preferences
d) Number of suppliers
Answer: c) Consumer preferences
38. An increase in the price of gasoline will likely lead to:
a) An increase in the demand for gasoline.
b) A decrease in the demand for gasoline.
c) An increase in the supply of gasoline.
d) A decrease in the supply of gasoline.
Answer: b) A decrease in the demand for gasoline.
39. Market equilibrium occurs when:
a) Demand exceeds supply.
b) Supply exceeds demand.
c) The quantity demanded equals the quantity supplied.
d) The price is set by the government.
Answer: c) The quantity demanded equals the quantity supplied.
40. A price ceiling is a government-imposed maximum price set:
a) Above the equilibrium price.
b) Below the equilibrium price.
c) Equal to the equilibrium price.
d) Regardless of the equilibrium price.
Answer: b) Below the equilibrium price.
41. If the price of a good is above the equilibrium price, there will be a:
a) Surplus, and the price will increase.
b) Surplus, and the price will decrease.
c) Shortage, and the price will increase.
d) Shortage, and the price will decrease.
Answer: c) Shortage, and the price will increase.
42. The main goal of a firm operating in a market economy is to:
a) Maximize consumer satisfaction.
b) Maximize employment.
c) Maximize profit.
d) Minimize production costs.
Answer: c) Maximize profit.
43. Which of the following market structures is characterized by a single seller and significant barriers to entry?
a) Perfect competition
b) Monopolistic competition
c) Oligopoly
d) Monopoly
Answer: d) Monopoly
44. Monopolistic competition is characterized by:
a) Many sellers offering identical products.
b) A single seller dominating the market.
c) Many sellers offering differentiated products.
d) A single seller with significant market power.
Answer: c) Many sellers offering differentiated products.
45. In a perfectly competitive market, firms are:
a) Price makers
b) Price takers
c) Price fixers
d) Price regulators
Answer: b) Price takers
46. A monopolist’s demand curve is:
a) Perfectly elastic
b) Perfectly inelastic
c) Downward-sloping
d) Upward-sloping
Answer: c) Downward-sloping
47. A firm’s marginal cost is the cost of producing:
a) One additional unit of output.
b) All units of output.
c) The average cost of production.
d) The total cost of production.
Answer: a) One additional unit of output.
48. Which of the following is an example of an external cost or negative externality?
a) A factory hiring additional workers.
b) A restaurant installing energy-efficient lighting.
c) A company dumping toxic waste into a nearby river.
d) A student studying to improve their grades.
Answer: c) A company dumping toxic waste into a nearby river.
49. A government-imposed tax on a good or service is an example of:
a) A price floor
b) A price ceiling
c) A subsidy
d) A tax incidence
Answer: d) A tax incidence
50. The Laffer curve illustrates the relationship between tax rates and:
a) Unemployment rates
b) Government spending
c) Tax revenue
d) The level of economic output
Answer: c)
51. The term “elasticity” in economics refers to:
a) The responsiveness of quantity demanded to changes in income.
b) The responsiveness of quantity demanded to changes in the price of related goods.
c) The responsiveness of quantity demanded to changes in the price of a good or service.
d) The responsiveness of quantity supplied to changes in the price of a good or service.
Answer: c) The responsiveness of quantity demanded to changes in the price of a good or service.
52. If the price elasticity of demand for a product is greater than 1, the demand is considered:
a) Inelastic
b) Unitary elastic
c) Perfectly elastic
d) Elastic
Answer: d) Elastic
53. The price elasticity of demand is likely to be more elastic for:
a) Necessities than for luxuries.
b) Short periods of time rather than long periods.
c) Goods with close substitutes rather than unique goods.
d) Goods that constitute a small proportion of an individual’s budget rather than a large proportion.
Answer: c) Goods with close substitutes rather than unique goods.
54. Cross-price elasticity of demand measures the responsiveness of the quantity demanded of one good to changes in the price of:
a) The same good
b) A complementary good
c) A substitute good
d) An inferior good
Answer: c) A substitute good
55. Which of the following statements is true about the income elasticity of demand for inferior goods?
a) It is positive.
b) It is negative.
c) It is zero.
d) It is undefined.
Answer: b) It is negative.
56. The long-run average total cost (LRATC) curve is U-shaped because of:
a) Economies of scale at low levels of output and diseconomies of scale at high levels of output.
b) Diseconomies of scale at low levels of output and economies of scale at high levels of output.
c) Constant returns to scale at all levels of output.
d) Increasing returns to scale at all levels of output.
Answer: a) Economies of scale at low levels of output and diseconomies of scale at high levels of output.
57. In the short run, a firm’s average variable cost (AVC) curve will:
a) Decrease continuously with an increase in output.
b) Increase continuously with an increase in output.
c) First decrease, reach a minimum point, and then increase as output increases.
d) Remain constant regardless of the level of output.
Answer: c) First decrease, reach a minimum point, and then increase as output increases.
58. Marginal revenue (MR) is defined as the change in:
a) Total revenue resulting from a one-unit change in output.
b) Total revenue resulting from a one-unit change in price.
c) Total revenue resulting from a one-unit change in cost.
d) Total revenue resulting from a one-unit change in profit.
Answer: b) Total revenue resulting from a one-unit change in price.
59. The profit-maximizing level of output for a firm occurs where:
a) Total revenue exceeds total cost.
b) Marginal cost equals marginal revenue.
c) Average total cost is at a minimum.
d) Average variable cost is at a minimum.
Answer: b) Marginal cost equals marginal revenue.
60. In perfect competition, the short-run supply curve of an individual firm is:
a) Horizontal
b) Vertical
c) Upward-sloping
d) Downward-sloping
Answer: a) Horizontal
61. In the long run, a perfectly competitive firm will earn:
a) Economic profit
b) Normal profit
c) Accounting profit
d) Loss
Answer: b) Normal profit
62. In monopolistic competition, firms have:
a) Many competitors offering identical products.
b) A single competitor dominating the market.
c) Some degree of market power due to product differentiation.
d) No ability to influence the market price.
Answer: c) Some degree of market power due to product differentiation.
63. A firm in monopolistic competition faces a downward-sloping demand curve because:
a) There are barriers to entry in the market.
b) The firm is a price taker.
c) There are no close substitutes for its product.
d) It produces a homogeneous product.
Answer: c) There are no close substitutes for its product.
64. Oligopoly is characterized by:
a) A few firms selling differentiated products.
b) Many firms selling identical products.
c) A single firm dominating the market.
d) No barriers to entry.
Answer: a) A few firms selling differentiated products.
65. Collusion in an oligopoly refers to:
a) The use of predatory pricing to eliminate competition.
b) A situation where firms openly cooperate to set prices and production levels.
c) Firms engaging in price wars to gain market share.
d) The use of barriers to entry to prevent new firms from entering the market.
Answer: b) A situation where firms openly cooperate to set prices and production levels.
66. Cartels are a type of collusion where firms:
a) Engage in price wars to gain market share.
b) Openly cooperate to set prices and production levels.
c) Use predatory pricing to eliminate competition.
d) Form an alliance to maximize consumer surplus.
Answer: b) Openly cooperate to set prices and production levels.
67. The Herfindahl-Hirschman Index (HHI) is used to measure:
a) The level of consumer satisfaction in the market.
b) The degree of product differentiation in the market.
c) Market concentration and the potential for market power.
d) The level of economies of scale in the industry.
Answer: c) Market concentration and the potential for market power.
68. Price discrimination refers to a pricing strategy where a firm:
a) Charges different prices to different customers based on their willingness to pay.
b) Lowers prices to drive competitors out of the market.
c) Charges a single price for all customers to maintain fairness.
d) Lowers prices during a recession to stimulate demand.
Answer: a) Charges different prices to different customers based on their willingness to pay.
69. A perfectly discriminating monopolist charges each customer:
a) The same price regardless of their willingness to pay.
b) The price at which marginal cost equals marginal revenue.
c) A price that varies based on the customer’s willingness to pay.
d) The price at which average cost equals average revenue.
Answer: c) A price that varies based on the customer’s willingness to pay.
70. In the real world, perfect price discrimination is difficult to achieve because:
a) Firms lack information about individual customers’ willingness to pay.
b) Customers have identical preferences and demand for a product.
c) Firms cannot produce different qualities of a product.
d) The government imposes regulations on pricing.
Answer: a) Firms lack information about individual customers’ willingness to pay.
71. Game theory is a branch of economics that studies:
a) The behavior of individuals in the market.
b) The behavior of firms in competitive markets.
c) The strategic interactions between decision-makers in various situations.
d) The role of government in the economy.
Answer: c) The strategic interactions between decision-makers in various situations.
73. The “prisoner’s dilemma” is a classic example of a situation in game theory where:
a) Both players cooperate to achieve the best outcome.
b) Both players defect and end up worse off than if they had cooperated.
c) One player cooperates while the other defects, leading to an optimal outcome for both.
d) One player defects while the other cooperates, leading to an optimal outcome for both.
Answer: b) Both players defect and end up worse off than if they had cooperated.
74. A dominant strategy in game theory refers to a strategy that:
a) Yields the highest possible payoff for a player, regardless of the other player’s choice.
b) Yields a lower payoff than other strategies, but the player has no better options.
c) Is only optimal if the other player also follows the same strategy.
d) Results in a Nash equilibrium.
Answer: a) Yields the highest possible payoff for a player, regardless of the other player’s choice.
75. The Nash equilibrium in a game occurs when:
a) Both players choose their dominant strategies.
b) Both players choose their weakest strategies.
c) Each player chooses the best strategy given the other player’s choice.
d) Both players cooperate to achieve the best outcome.
Answer: c) Each player chooses the best strategy given the other player’s choice.
76. The Coase theorem suggests that, in the presence of externalities, private parties can reach an efficient outcome through:
a) Government intervention and regulation.
b) The market system without any government intervention.
c) A legal framework that enforces strict property rights.
d) Government subsidies to affected parties.
Answer: b) The market system without any government intervention.
77. Public goods are characterized by:
a) Rivalry in consumption and excludability.
b) Nonrivalry in consumption and excludability.
c) Rivalry in consumption and nonexcludability.
d) Nonrivalry in consumption and nonexcludability.
Answer: d) Nonrivalry in consumption and nonexcludability.
78. The “free-rider” problem occurs with public goods because:
a) People tend to consume more of the good than is socially optimal.
b) People can enjoy the benefits of the good without paying for it.
c) Producers have little incentive to produce the good.
d) The government does not allocate enough resources for the production of public goods.
Answer: b) People can enjoy the benefits of the good without paying for it.
79. The tragedy of the commons is a situation in which:
a) Private property rights are well-defined and enforced.
b) Public goods are efficiently allocated through the market system.
c) Common resources are overused and depleted due to lack of ownership and control.
d) The government intervenes to address market failures.
Answer: c) Common resources are overused and depleted due to lack of ownership and control.
80. A positive externality occurs when:
a) An activity generates costs that are not reflected in the market price.
b) An activity generates benefits that are not reflected in the market price.
c) A market outcome results in a loss of economic efficiency.
d) A market outcome results in a surplus of goods and services.
Answer: b) An activity generates benefits that are not reflected in the market price.
81. Which of the following is an example of a positive externality?
a) Pollution from a factory affecting nearby residents’ health negatively.
b) A person getting vaccinated, which also benefits others by reducing the spread of a disease.
c) A car accident causing damage to surrounding properties.
d) A student skipping school, which leads to lower educational outcomes for others in the class.
Answer: b) A person getting vaccinated, which also benefits others by reducing the spread of a disease.
82. The tragedy of the commons can be best mitigated by:
a) Government regulation and control of common resources.
b) Privatization of common resources.
c) Encouraging collective action and cooperation among users of common resources.
d) Allowing open access to common resources without restrictions.
Answer: b) Privatization of common resources.
83. Price controls, such as price ceilings and price floors, often lead to:
a) A more efficient allocation of resources.
b) An increase in consumer surplus.
c) Market distortions and unintended consequences.
d) Increased competition among producers.
Answer: c) Market distortions and unintended consequences.
84. The government implements a minimum wage law to:
a) Encourage firms to hire more workers.
b) Ensure that workers are paid fairly.
c) Reduce unemployment rates.
d) Stabilize prices in the labor market.
Answer: b) Ensure that workers are paid fairly.
85. Which of the following is a potential consequence of imposing a price ceiling on rental housing?
a) An increase in the quantity supplied of rental housing.
b) An increase in the quantity demanded of rental housing.
c) A surplus of rental housing.
d) A shortage of rental housing.
Answer: d) A shortage of rental housing.
86. The “invisible hand” concept, introduced by Adam Smith, suggests that:
a) The government should intervene to correct market failures.
b) Market prices and self-interested actions lead to desirable social outcomes.
c) Consumers and firms are always perfectly informed about market conditions.
d) Producers have complete control over market prices.
Answer: b) Market prices and self-interested actions lead to desirable social outcomes.
87. In a market economy, prices play a crucial role in:
a) Indicating the preferences of consumers.
b) Regulating the allocation of resources.
c) Reducing income inequality.
d) Eliminating competition among firms.
Answer: b) Regulating the allocation of resources.
88. The circular flow model of the economy demonstrates how:
a) Firms produce goods and services for consumers in exchange for money.
b) Households consume goods and services produced by firms.
c) Money flows through the economy, linking households and firms.
d) All of the above.
Answer: d) All of the above.
89. In the circular flow model, the market where businesses sell goods and services to households is known as the:
a) Product market
b) Factor market
c) Labor market
d) Resource market
Answer: a) Product market
90. In the circular flow model, the market where households sell their labor and other factors of production to businesses is known as the:
a) Product market
b) Factor market
c) Labor market
d) Resource market
Answer: b) Factor market
91. Economic growth is measured by the:
a) Increase in the money supply.
b) Increase in government spending.
c) Increase in the level of real GDP over time.
d) Increase in the price level.
Answer: c) Increase in the level of real GDP over time.
92. Economic indicators, such as GDP, unemployment rate, and inflation rate, are used to:
a) Measure the well-being of the society.
b) Evaluate government policies and economic performance.
c) Determine the level of consumer spending in the economy.
d) Predict short-term changes in the stock market.
Answer: b) Evaluate government policies and economic performance.
94. Which of the following statements about economic indicators is true?
a) The unemployment rate measures the percentage of the labor force that is not working.
b) The inflation rate measures the percentage change in the quantity of goods and services produced in an economy.
c) The Consumer Price Index (CPI) is used to measure changes in the overall level of economic activity.
d) Gross Domestic Product (GDP) measures the total value of imports and exports in an economy.
Answer: a) The unemployment rate measures the percentage of the labor force that is not working.
95. The natural rate of unemployment is the level of unemployment that occurs when:
a) The economy is in a recession.
b) The economy is at full employment and operating at its potential output.
c) The economy is experiencing high inflation rates.
d) The economy is in a deflationary spiral.
Answer: b) The economy is at full employment and operating at its potential output.
96. The unemployment rate is calculated as the number of unemployed individuals:
a) Divided by the total population of the country.
b) Divided by the number of people in the labor force.
c) Multiplied by the total labor force.
d) Minus the number of people employed.
Answer: b) Divided by the number of people in the labor force.
97. Structural unemployment occurs when:
a) There is a cyclical downturn in the economy.
b) There is a shortage of labor in the market.
c) There is a mismatch between the skills of job seekers and the skills demanded by employers.
d) There are temporary fluctuations in the business cycle.
Answer: c) There is a mismatch between the skills of job seekers and the skills demanded by employers.
98. The Phillips curve illustrates the inverse relationship between:
a) Inflation and unemployment.
b) Inflation and interest rates.
c) GDP and unemployment.
d) GDP and inflation.
Answer: a) Inflation and unemployment.
99. Stagflation refers to a situation where an economy experiences:
a) High inflation and high unemployment simultaneously.
b) Low inflation and low unemployment simultaneously.
c) High inflation and low unemployment simultaneously.
d) Low inflation and high unemployment simultaneously.
Answer: a) High inflation and high unemployment simultaneously.
100. The Federal Reserve uses monetary policy to:
a) Control the level of government spending.
b) Regulate the money supply and influence interest rates to stabilize the economy.
c) Set tax rates and stimulate economic growth.
d) Control the level of consumer spending.
Answer: b) Regulate the money supply and influence interest rates to stabilize the economy.