Monetary Policy

Monetary policy in the Us is the responsibility of which institution

• US treasury

• Federal Reserve

• Internal Revenue Service

• Office of budget management

Which best describes the fundamental objective of monetary policy?

• a rapid pace of economic growth

• a money supply which is based on the gold standard

• 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

Which statement most accurately explains the role of the open market committee of the FED

• provides advice on banking policy to the FED

• monitors regulatory banking laws for member banks

• sets policy on the sale and purchase of government bonds by the FED

• Follows the actions and operations of financial markets to keep them open and competitive

The economy is experiencing high unemployment and a low rate of economic growth and the fed decides to pursue an easy money policy by

• buying government securities

• selling government securities

• raising the reserve ratio

• raising the discount rate

Which action would most likely increase the excess reserves of commercial banks?

• a central bank sells bond to the public

• a central bank sells bonds to commercial banks

• the central bank buys bond from commercial banks

• the board of governors increases the discount rate

What consumer behavior is the Federal Reserve board trying to encourage when it implements a loose monetary policy?

• increased saving and reduced spending

• decreased saving and increased spending

• increased saving and spending

• decreased saving and spending

If the federal reserve lowers the reserve requirement, Bobby, a consumer, will more likely

• buy a house

• save his money

• buy bonds

• pay a high interest rate

What effect does a tight money policy have on the reserve requirement and the economy's money supply?

• it raises the reserve requirement, thereby increasing the money supply

• it lowers the requirement, thereby decreasing the money supply

• it raises the reserve requirement, thereby decreasing the money supply

• it lowers the reserve requirement, thereby increasing the money supply.

This year, when Bonnie arrives at the country store mentioned in the previous question, she discovers that the pies cost $1 more than they did the previous year. Bonnie is noticing what?

• price ceiling

• price floor

• inflation

• stagflation