Crash Course Economics 10

What is the purpose of the Federal Reserve?

• to regulate the monetary flow

• to provide business loans

• to fund government programs

• to collect taxes

What is the purpose of the interest rate?

• to determine the cost of borrowing money

• to collect tax revenues for the government

• to collect additional money on expenditures

• to ensure the government does not accumulate debt

What does principle in finance mean?

• the original amount of money borrowed

• the accumulated interest

• the nominal cost adjusted for inflation

• the new cost given accumulated interest charges

Why would the Fed want to lower interest rates?

• to encourage more spending

• to prevent rapid business growth

• to prevent overproduction

• to regulate business capital

Why would the Fed want to raise interest rates?

• to slow down inflation

• to complete with foreign markets

• to encourage mass production

• to raise the minimum wage

What are liquid assets?

• assets that can be quickly converted to cash

• assets that have no monetary value

• assets that cannot be publicly traded

• assets that do not affect production

What is the Reserve Requirement?

• the amount of money the banks have to have available

• the amount of money the government can seize in foreclosure

• the amount of capital needed to refinance a government loan

• the amount of money the Federal Reserve prints each fiscal year

What is the Fed Discount Rate?

• the amount of interest the Fed charges banks

• the amount of money discounted to consumers

• the amount of money needed to pay off the principal

• the amount of money acquired from hiked interest rates

What is an Open Market Operation?

• a short term government bond

• a specialized loan for small business

• a corporate tax to help stabilize the economy

• the cost of labor in order to meet payroll demands

What is the ideal outcome of Open Market Operations?

• boost money supply and lower interest rates

• create higher prices to help businesses

• create lower prices to help consumers

• limit the amount of credit purchasing