Regulatory Policy Answers

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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
2
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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.
3

Which statements describe how the Fed responds to high inflation? Check all that apply.It charges banks more interest.It pays banks less interest.It sells more securities.It decreases the money supply.It increases the money supply.

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.
4

Which best describes a central bank's primary goals?

A
limiting inflation and reducing unemployment
B
reducing unemployment and maintaining cash flow
C
controlling stagflation and reducing unemployment
D
managing credit and ensuring the money supply's liquidity
5

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.
6

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

A
interest rates.
B
liquidity.
C
inflation rates.
D
credit.
7

lowstablehigh

A
low
B
stable
C
high
8

What is a potential negative effect of an expansionary policy?

A
decreased borrowing
B
increased interest rates
C
increased inflation
D
decreased available credit
9

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

A
saving.
B
spending.
C
borrowing.
D
investing.
10

Federal Reserve interest federal fundsloan interest

A
Federal Reserve interest
B
federal funds
C
loan interest

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