AnswersIL-EconomicsMonetary Policy: The Federal Reserve

Monetary Policy: The Federal Reserve Answers

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1
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Which best describes a central bank's primary role?

A
controlling inflation
B
increasing credit
C
printing money
D
creating monetary policy
2
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In how many cities are Federal Reserve district banks located?

A
4
B
12
C
50
D
8
3

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
4

If the domino effect occurs as a result of changes in the money supply, what will most likely happen as an immediate result of banks having more money to lend?

A
Borrowing will decrease.
B
Interest rates will decrease.
C
Investing will decrease.
D
Inflation will decrease.
5

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

A
interest rates.
B
liquidity.
C
inflation rates.
D
credit.
6

When the Fed adjusts its interest rate, it directly influences consumer

A
saving.
B
spending.
C
borrowing.
D
investing.
7

What is a potential negative effect of an expansionary policy?

A
decreased borrowing
B
increased interest rates
C
increased inflation
D
decreased available credit
8

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
9

Why does the Fed pay interest to banks?

A
It is interest on money held in reserve.
B
It is interest on credit available to the Fed.
C
It is interest on loans taken by the Fed.
D
It is interest on government investments.
10

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

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