Unit 7 - The Federal Reserve

Monetary policy in the United States is the responsibility of which government institution?

• U.S. Treasury

• Federal Reserve

• Internal Revenue Service

• Office of Management and Budget

Which best describes the fundamental objective of monetary policy?

• A rapid pace of economic growth

• a money supply based on the gold standard

• a full-employment, noninflationary level of total output

• A balanced budget consistent with full employment

Which best explains how the Federal Reserve alters the amount of the nation's money supply?

• reducing the liabilities of the banking system

• controlling the assets of the nation's largest banks

• minting coins and printing currency distributed to banks

• manipulating the size of excess reserves held by commercial banks

The economy is experiencing high unemployment and a low rate of economic growth. The Fed decides to pursue expansionary monetary policy. Which action by the Fed would be most consistent with this policy?

• buying government securities (bonds)

• selling government securities (bonds)

• raising the reserve ratio (requirement)

• raising the discount (interest) rate

Which of the following does the Federal Reserve use most often to combat recession?

• Selling securities (bonds)

• Buying securities (bonds)

• Increasing interest rates

• Increasing the reserve requirement

What term is used to describe the percent of the labor force that does not have a job but is currently looking for one?

• Leading Economic Indicator

• Full Employment

• Unemployment Rate

• Structural Unemployment

What term is used to describe an increase in the general price level?

• deflation

• monetary policy

• stagflation

• inflation

Which best describes Gross Domestic Product (GDP)?

• monetary value of all final goods and services produced within a nation in a particular year.

• national income minus all non-income charges against output.

• monetary value of all economic resources used in producing a year's output.

• monetary value of all goods and services, final and intermediate, produced in a specific year.

What term describes GDP data that have been adjusted for changes in the price level?

• real GDP

• current GDP

• actual GDP

• nominal GDP

Which term is used to describe recurring upswings and downswings in an economy's real GDP over time?

• recessions

• business cycles

• output yo-yo's

• total product oscillations