AnswersIL-EconomicsMonetary Policy: The Federal Reserve

Monetary Policy: The Federal Reserve Answers

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Why is the Fed often referred to as a “lender of last resort,” or the last lender to turn to in a crisis?

A
It lends consumers money when other banks will not.
B
It keeps all failing banks afloat to avoid economic disruption.
C
It helps finance and stabilize central banks internationally.
D
It offers banks financial protection to keep consumers from panicking.
3

The Fed’s use of open market operations affects banks’

i
interest rates.
m
money available to lend.
l
lending practices.
s
stability.
4

best

l
limiting inflation and reducing unemployment
r
reducing unemployment and maintaining cash flow
c
controlling stagflation and reducing unemployment
m
managing credit and ensuring the money supply's liquidity
5

Which statements describe how the Fed responds to high inflation? Check all that apply.

A
It charges banks more interest.
B
It pays banks less interest.
C
It sells more securities.
D
It decreases the money supply.
E
It increases the money supply.
6

Which best describes a central bank's primary role?

A
controlling inflation
B
increasing credit
C
printing money
D
creating monetary policy
8

What is the full name of the US central bank, known as the Fed?

A
the Federal Reserve Bank
B
the Federal Deposit Insurance Corporation
C
the Federal Financial Institution
D
the Federal Bank
9

Which best describes what a central bank uses monetary policy to do?

A
ensure that the government has a balanced budget
B
influence financial institutions globally
C
ensure that the government is sufficiently funded
D
steer the economy away from recession and toward growth
10

Which of these is a banking activity of the Fed?

p
printing money
r
regulating securities markets
s
storing money for banks
f
funding government programs
11

Economists studying the money supply categorize the status of the money based on

A
interest rates.
B
liquidity.
C
inflation rates.
D
credit.
12

Which statement best describes how the Fed responds to recessions?

A
It sells more securities.
B
It charges banks more interest.
C
It increases reserve requirements.
D
It increases the money supply.
13

[BLANK]

A
low
B
stable
C
high
14

If the domino effect occurs as a result of changes in the money supply, what will most likely happen as an immediate result of interest rates being increased?

A
Borrowing will decrease.
B
Investing will decrease.
C
Inflation will increase.
D
Liquidity will increase.
15

Which best describes a central bank's primary role?

A
controlling inflation
B
increasing credit
C
printing money
D
creating monetary policy
16

Which of these is a banking activity of the Fed?

A
printing money
B
regulating securities markets
C
storing money for banks
D
funding government programs

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