4.3 Monetary Policy

Open Ended

Why might the government not always make good decisions regarding the economy?

Multiple Choice

Which of the following best describes the difference between expansionary and contractionary fiscal policies?

• Expansionary policies aim to increase economic growth, while contractionary policies aim to slow economic growth.

• Expansionary policies aim to slow economic growth, while contractionary policies aim to increase economic growth.

• Both expansionary and contractionary policies aim to increase economic growth.

• Both expansionary and contractionary policies aim to slow economic growth.

Open Ended

Explain how monetary policy and fiscal policy differ in terms of who controls them and their main objectives.

Multiple Select

Select all statements that are true about the Federal Reserve.

• It is a national system of banks that influences and controls the economy.

• It is called 'The Fed'.

• All nationally-chartered and most state chartered banks are required to join.

• It is part of the FBI.

Multiple Choice

Which of the following is responsible for influencing the supply of money in the United States?

• The Federal Reserve

• The President

• Congress

• The Supreme Court

Open Ended

Describe the significance of the Federal Open Market Committee as mentioned in the slides.

Multiple Choice

Who appoints the members of the Federal Reserve Board of Governors?

• The President

• The Congress

• The Supreme Court

• The Treasury Secretary

Multiple Choice

Why is the Board of Governors appointed rather than elected?

• To ensure they can make unpopular decisions without worrying about re-election

• To make the process faster

• To allow the public to vote

• To reduce government spending

Multiple Select

Which of the following are roles of the Federal Reserve?

• Supervises lending practices

• Issues currency

• Conducts government securities auctions

• Sets tax rates

Open Ended

Explain the main functions of the Federal Reserve as described in the slides.

Multiple Choice

Which of the following is a way the Fed could speed up the economy before 2008?

• By increasing the supply of money, which lowers interest rates

• By decreasing the supply of money, which raises interest rates

• By keeping the supply of money constant

• By raising taxes

Open Ended

How does lowering interest rates encourage people to spend more? Or how does raising interest rates discourage people from spending money?

Multiple Choice

In a recession it's best if people save all of their money.

• True

• False

Multiple Choice

After 2008, how did the Fed's approach to monetary policy change?

• They stopped adjusting the money supply and started changing administered rates.

• They continued to adjust the money supply as before.

• They focused only on fiscal policy.

• They eliminated interest rates.

Multiple Select

Which of the following are considered the new monetary policy tools after 2008?

• Discount Rate

• Interest on Reserves

• Open Market Operations

• Reserve Requirements

Multiple Choice

What is the main way the Federal Reserve can influence the interest rates that banks charge their customers?

• By setting reserve requirements

• By buying government bonds

• By lowering or raising the interest rate they charge banks

• By printing more money

Multiple Choice

Explain how changes in the discount rate affect aggregate demand.

• Increasing the discount rate boosts aggregate demand, while lowering it reduces demand.
• Changes in the discount rate have no impact on aggregate demand levels.
• Lowering the discount rate increases aggregate demand, while raising it decreases aggregate demand.
• Raising the discount rate stimulates aggregate demand, while lowering it contracts demand.

Multiple Choice

Which of the following statements about interest on reserves is correct?

• It is the interest paid on money that banks loan to customers.

• It is the interest paid on money that banks keep on hand, in their account at the Fed.

• It is the interest paid on government bonds.

• It is the interest paid on money that banks borrow from other banks.

Multiple Choice

When the interest on reserves increases, what happens to aggregate demand?

• Aggregate demand increases because banks loan out more money.

• Aggregate demand decreases because banks loan out less money.

• Aggregate demand stays the same.

• Aggregate demand becomes unpredictable.

Multiple Choice

During a recession, the Federal Reserve uses ___ policy to increase aggregate demand.

• expansionary
• inflationary

• contractionary

Multiple Select

Select all the actions the Federal Reserve would take during a period of inflation to decrease aggregate demand.

• Increase the Discount Rate

• Decrease the Discount Rate

• Increase the Interest on Reserves

• Decrease the Interest on Reserves

Multiple Choice

What is the main objective of expansionary policy?

• To reduce inflation

• To decrease government debt

• To stimulate economic growth

• To increase interest rates

Open Ended

What is the FED and what does it have to do with you?