Review SSEMA2 Test Questions 1-11

In which situation might the Federal Reserve buy government securities and lower the discount rate?

• In a recession
• When the inflation rate is too high
• When aggregate demand is too high
• When the economy is expanding

Which component of the Federal Reserve System holds the most power in regards to day to day monetary policy?

• The Board of Govenors
• Congress and the President
• The 12 district banks
• The Federal Open Market Commitee

. Monetary policy is defined as the Government... 

• A  taxing and spending decisions of the United States 
•  B  buying and selling of currency in foreign exchange markets
•  C  interaction of buyers and sellers in the market place
• D decisions of the Federal Reserve System that determine the money supply.

The actions of the FED that control and regulate the amount of money in the economy are referred to as 

•   fiscal policy
• monetary policy.
•  international trade
• opportunity costs.

Which is the Fed MOST likely to do in the event of a recession?  

•  A  Buy treasury bonds on the open market. 
• B  Sell treasury bonds on the open market.
• C  Raise the discount rate.
• D  Raise the reserve requirement.

When the Fed is conducting open market operations, they are buying or selling 

• A  stocks on the New York Stock Exchange. . .
•  B  goods in the product market
• C  factors in the factor market. 
• D  government bonds

. When the money supply is increased, which is MOST likely to happen? 

• A  The price level will decrease. ` 
•   B  The price level will increase. 
• C  The price level will not be affected.
• D  Each dollar will be able to buy more goods.

Which of the following is a MONETARY policy that might be used to reduce inflation?

• Decreasing taxation   
• Decreasing the discount rate 
•  Open-market sales 
• Increasing government spending

The ________ is what financial institutions charge each other for overnight loans of reserves. 

• federal Funds Rate 
• Inflation Rate
•  Reserve requirements and discount rate
• Interest on Reserves

Raising the reserve requirement would be most appropriate when 

• the economy is overheating and inflating. 
• real GDP is down and unemployment is up. 
• the government is trying to expand the economy. 
•   the FED wants to counteract a contractionary fiscal policy.