The Federal Reserve System & Monetary Policy

What are the 3 major measures of macroeconomic activity?

• GDP, CPI, GRE

• GDP, CPI, Unemployment

• Gross Domestic Product, Consumer Price Index, Unemployment Rate

• GRE, Peak, CRD

What is Gross Domestic Product (GDP)?

• the primary quantitative measure of economic activity for a nation

• dollar value of all final G/S produced in a country in a 12 month period

• the sum of consumption by households, investment by businesses, government spending, and net exports

• all of these answers are correct

• none of these answers are correct

In addition to monitoring banking & economic conditions, what are some of the functions of the Federal Reserve System?

• banking services for the gov't, issuing currency, raising/lowering taxes

• raising the debt ceiling, setting the discount rate, issuing currency

• setting the discount rate, regulating banks, regulating gov't spending

• banking services for the gov't, buying/selling US bonds, issuing currency

The FED's most important function is

• maintaining a checking account for the US government

• regulating the money supply for the US

• setting the discount rate

• buying & selling US securities/bonds

The 2 Monetary Policies used by the FRS are

• easy money decreases the $ supply & tight money increases the $ supply

• inside lag increases the $ supply & outside lag decreases the $ supply

• easy money increases the $ supply & tight money decreases the $ supply

• expansionary increases the $ supply & contractionary decreases the $ supply

The FED increases/decreases the nation’s money supply in order to meet the 3 main government economic goals. These goals are

• decrease in prices, full employment, reduction in gross domestic product

• stable prices, full employment, economic growths

• consistent prices, regulation of the stock market, reduce gov't spending

• increase in prices, full unemployment, economic growth

What are the 4 Monetary Policy tools used by the FRS?

• open market operations, discount rate, interest on reserves, gov't spending

• OMO, discount rate, reserve requirements, interest on reserves

• open market op (OMO), interest on reserves, gov't spending, tax rates

• open market operations (OMO), discount rate, tax rates, reserve requirement

__________ is the Monetary Policy tool is used most often by the Federal Reserve System.

• open market operations

• interest on reserves

• reserve requirement

• discount rate

The FED's open market operations refers to

• changing the interest rate on loans

• paying member banks interest on the money they hold in reserve

• The buying or selling of bonds

• raising or lowering the discount rate

Which Monetary Policy tool is used least often and why?

• discount rate because it makes it too difficult to monitor loan activity

• interest on reserves because the interest rate changes too frequently

• reserve requirement because changing the requirement is too disruptive to banking operations

• open market operations because of the impact on the money supply in circulation