Monetary and Fiscal Policy

What is the primary task of the Federal Reserve System?

• Controlling inflation

• Encouraging full employment

• Regulating the amount of money in circulation

• Setting interest rates

What is the main way the Federal Reserve controls the money supply?

• Clearing checks

• Supplying actual currency

• Setting interest rates

• Loan money to other banks

What is the interest rate called that the Federal Reserve sets?

• Discount rate

• Federal funds rate

• Prime rate

• Libor rate

What is the purpose of the bank reserve requirement?

• To prevent catastrophic bank runs

• To control inflation

• To encourage full employment

• To regulate interest rates

How does the Federal Reserve influence the amount of money in circulation through interest rates?

• By charging high interest rates to encourage borrowing

• By charging low interest rates to discourage borrowing

• By setting interest rates for banks to lend money

• By buying and selling government debt

What is the term used for the process of the Federal Reserve buying and selling government debt?

• Quantitative easing

• Open market operations

• Monetary policy

• Fiscal policy

What is one of the causes of inflation?

• Increase in government spending

• Decrease in money supply

• Decrease in consumer spending

• Increase in interest rates

What is the primary reason why the Federal Reserve is an independent body?

• To regulate interest rates

• To control inflation

• To encourage full employment

• To avoid political influence

What is fiscal policy?

• The government's ability to regulate interest rates

• The government's ability to control inflation

• The government's ability to raise taxes and spend money

• The government's ability to set monetary policy

What is the main reason why Americans have been reluctant to raise taxes?

• To encourage economic growth

• To reduce government spending

• To stimulate consumer spending

• To adhere to supply side economics