1. What is the main function of central banks in a modern economy?

 a) Control inflation

 b) Manage international reserves

 c) Establish fiscal policies

 d) All of the above

2. What characterizes a free market economy?

 a) High government intervention

 b) Fixed prices established by the government

 c) Prices determined by supply and demand

 d) State ownership of the means of production

3. What is the "invisible hand" theory and who formulated it?

 a) The theory that the government should control the market, formulated by John Maynard Keynes

 b) The idea that individuals, by pursuing their own interest, contribute to the general well-being, formulated by Adam Smith

 c) The belief that the market must be fully regulated, formulated by Karl Marx

 d) The theory that the market is inefficient and needs central planning, formulated by Milton Friedman

4. What is the main difference between monetary policy and fiscal policy?

 a) Monetary policy is managed by the government, while fiscal policy is managed by central banks

 b) Monetary policy deals with money supply and interest rates, while fiscal policy involves taxes and government spending

 c) Fiscal policy refers to controlling inflation, while monetary policy refers to controlling unemployment

 d) Monetary and fiscal policy are essentially the same thing

5. What is an "economic cycle"?

 a) A forecast model for economic growth

 b) The natural variation of the economy between expansion and recession

 c) The change in monetary policies over time

 d) The change in the amount of money in circulation