Monetary Policy

The central bank in the USA that regulates the monetary system

• The FED
• FDIC
• The IRS
• Social Security

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.

Cash that banks must keep in the vault.

• excess reserves
• fiscal policy
• required reserves
• crowding out effect

Which of the following scenarios would cause the nation’s money supply to INCREASE?

• Decreasing government spending
• Lowering interest rates
• Raising interest rates
• Raising the Interest on Reserve Balances (IORB) rate.

What happens to the money circulation, when the FED orders a "tight" money policy?

• more money is put out into circulation
• less money is put into circulation
• circulation stays the same
• interest rates rise

What action would the Federal Reserve take to control inflation?

• Increase the Interest on Reserve Balances (IORB) interest rate.

• Decrease the Interest on Reserve Balances (IORB) interest rate.

• Increase taxes
• Print more money

Lowering interest rates to stimulate the economy is called:

• Contractionary Fiscal Policy

• Expansionary Fiscal Policy

• Expansionary monetary policy

• Contractionary Monetary Policy

An expansionary policy means that the Fed is attempting to

• increase the size of the nation's money supply

• decrease the size of the nation's money supply

A contractionary policy means that the Fed is attempting to

• increase the size of the nation's money supply

• decrease the size of the nation's money supply

Which policy would help fight inflation?

• Expansionary

• Contractionary