Monetary Policy & the Federal Reserve

Which is a goal of the Federal Reserve?

• Create a high level of inflation

• Create price stability in the economy

• Print currency for American citizens

• Develop fiscal policy for the United States

If the Fed wanted to contract or tighten the economy to help fight inflation, they might

• Increase reserves to limit what banks can loan out

• Lower the interest rate

• Decrease reserves allowing banks to loan more

• Decrease government spending

If the Fed wanted to expand or ease monetary policy, which might they do?

• Increase reserves, limiting what banks can loan

• Increase the interest rate

• Decrease the interest rate

• Lower taxes

Fee charged to borrow money

• Inflation
• Interest
• Discount rate
• Reserve requirement

What does Inflation do to the value of money?

• Makes it go up.
• Makes it go down.
• Makes it stay the same.

Does increasing the money supply cause inflation or deflation?

• Inflation
• Deflation

The primary role of the Federal Reserve Bank is to steer the economy by

• controlling the budget
• setting spending levels.
• controlling the money supply.
• loaning out money.

In a recession, the Fed would likely

• Increase the supply of money in the economy
• Decrease the supply of the money in the economy

The Federal Reserve can increase __________, which makes banks more selective when loaning out money

• Reserve Requirements
• Percentage/Earnings Ratios
• Dividends
• Blue Chip Stocks

If the economy is expanding too quickly, the Federal Reserve will institute which type of monetary policy?

• Expansionary
• Contractionary
• Equanimitous
• Whole Dollar