Economic Policy and Financial Regulation Quiz

Comprehensive CEMAP quiz covering macroeconomic objectives, monetary and fiscal policy, inflation control, and financial regulation. Test your knowledge of the Bank of England's role, EU financial regulation, and economic policy impacts.

CEMAP Topics Covered: macroeconomic objectives, inflation targeting, monetary policy, fiscal policy, Bank of England functions, EU regulations vs directives, systemic risk management, and economic policy impacts.

This quiz is specifically designed for CEMAP students preparing for their exams and financial services professionals maintaining their economic knowledge.

CEMAP quiz, Certificate in Mortgage Advice and Practice, economic policy, financial regulation, macroeconomic objectives, inflation, monetary policy, fiscal policy, Bank of England, EU regulation

Economic Policy and Financial Regulation Quiz

1. What are the four key macroeconomic objectives that UK governments generally seek to achieve?

A. Price stability, low unemployment, stable economic growth, and balance of payments equilibrium.
B. Disinflation, high foreign investment, economic contraction, and trade surplus.
C. Zero inflation, full employment, rapid economic growth, and surplus balance of payments.
D. Tax reduction, increased public spending, currency devaluation, and low interest rates.

2. What is the UK government’s inflation target, and how is it measured?

A. 2% as measured by the Consumer Prices Index (CPI), with a maximum divergence of 1% either way.
B. 3% as measured by the Retail Prices Index (RPI), with no divergence allowed.
C. 1% as measured by the Harmonised Index of Consumer Prices (HICP), with a maximum divergence of 0.5% either way.
D. 4% as measured by the GDP deflator, with a maximum divergence of 2% either way.

3. What is the primary tool used by the Bank of England to control inflation?

A. Fiscal policy adjustments.
B. Manipulation of interest rates.
C. Direct control of government wages.
D. Purchases in foreign exchange markets.

4. What is the difference between inflation and disinflation?

A. Inflation is a general rise in prices, while disinflation is a fall in the rate of inflation.
B. Inflation is a general fall in prices, while disinflation is a rise in the rate of inflation.
C. Inflation is a rise in unemployment, while disinflation is a fall in unemployment.
D. Inflation is a rise in GDP, while disinflation is a fall in GDP.

5. What is the likely impact of a budget deficit on the economy?

A. The economy contracts due to reduced public spending.
B. The economy expands due to increased public spending.
C. The economy remains neutral as taxes and spending balance out.
D. The economy experiences deflation due to reduced money supply.

6. What is the main difference between an EU regulation and an EU directive?

A. Regulations are binding in their entirety and directly applicable, while directives require member states to achieve a result but allow flexibility in implementation.
B. Regulations are optional for member states, while directives are mandatory.
C. Regulations apply only to specific industries, while directives apply to all sectors.
D. Regulations are enforced by national governments, while directives are enforced by the European Parliament.

7. What is the role of the European Systemic Risk Board (ESRB)?

A. To supervise individual financial institutions in the EU.
B. To prevent and mitigate systemic financial risk across the EU.
C. To set interest rates for EU member states.
D. To regulate taxation policies across the EU.

8. What is the likely consequence of the Monetary Policy Committee (MPC) raising the Bank rate?

A. Mortgage payments and borrowing costs increase.
B. Inflation rises rapidly.
C. Unemployment decreases significantly.
D. Public spending increases.

9. What is the primary purpose of fiscal policy?

A. To control the supply of money through interest rate adjustments.
B. To influence the level of economic activity through taxation and public spending.
C. To regulate purchases in foreign exchange markets.
D. To manage the balance of payments.

10. Which UK body is responsible for monitoring systemic financial risk?

A. The Financial Conduct Authority (FCA).
B. The Prudential Regulation Authority (PRA).
C. The Bank of The Bank of England.
D. The Financial Ombudsman Service.

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