AnswersHSA 26-27 EconomicsFiscal Policy: Taxes

Monetary Policy: The Federal Reserve Answers

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1
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Which statement describes how borrowers will most likely benefit when the Fed reduces reserve requirements?

A
Loan requirements will likely be relaxed.
B
Interest rates will likely decrease.
C
Housing prices will likely decrease.
D
Investment opportunities will likely improve.
2
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The Fed’s use of open market operations affects banks’

A
interest rates.
B
money available to lend.
C
lending practices.
D
stability.
3

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
4

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

A
interest rates.
B
liquidity.
C
inflation rates.
D
credit.
5

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.
6

[BLANK]

A
low
B
stable
C
high
7

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.

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