The Tools of Monetary Policy - Video Check

Influencing the economy by changing the reserve requirement is called:

• Fiscal policy
• Monetary policy
• Tight Money
• Easy Money

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.

Increasing the reserve requirement has which of the following results:

• More is lent out and more is paid in interest
• More is lent out and less is paid back in interest
• Less is lent out and more is paid in interest
• Less is lent out and less is lent in interest.

The Fed keeps a certain amount of money out of circulation. This is referred to as....

• Reserve requirement
• Emergency Fund
• Stockpile
• Hoard

How does cheaper money (lower interest rates) affect the amount of money supplied or in circulation?

• Decrease the money supply

• Doesn't affect the money supply

• Increases the money supply

• all of the above

Which action increases the money supply?

• the Fed BUYS bonds on the market
• the Fed raises the discount rate
• the federal gov. decreases government spending
• the federal gov. increases personal income taxes

Most common tool used by the Feds to control the supply of money:

• Reserve Requirement

• Open Market Operations

• Discount Rate

If the supply of money line shifts to the left along the X axis, what happens to the interest rate?

• higher

• lower

• stays the same

If the Feds sell bonds on the open market, what will occur to the money supply?

• increase

• decrease

• stay the same

Which of the two actions listed below in the answers - identify which one affects ONLY commercial banks

• Reserve Requirement

• Open Market Operations