Federal Reserve Bank and Open Market Operations Quiz

What is the main role of the Federal Reserve?

• To set monetary policy

• To manage fiscal policy

• To regulate the stock market

• To oversee international trade

What are open market operations?

• Buying or selling securities in the open market

• Controlling inflation rates

• Setting interest rates for home loans

• Regulating the banking system

Which body of the Federal Reserve makes monetary policy decisions?

• Federal Reserve System

• Federal Reserve Board of Governors

• Federal Reserve Bank of New York

• Federal Open Market Committee (FOMC)

What is the federal funds rate?

• The interest rate banks charge each other for overnight loans

• The interest rate on consumer loans

• The interest rate on long-term debt

• The interest rate set by the U.S. Treasury

How does the federal funds rate affect other interest rates?

• It can influence other shorter-term interest rates

• It has no impact on other interest rates

• It only affects long-term interest rates

• It determines the interest rates for home loans

What are open market operations used for?

• Implementing monetary policy

• Regulating the stock market

• Controlling government spending

• Managing international trade

What is the purpose of expansionary monetary policy?

• To increase interest rates and discourage borrowing

• To control inflation and reduce government debt

• To decrease interest rates and encourage borrowing

• To stabilize prices and promote employment

What happens when the Federal Reserve purchases government securities?

• Reserves in the banking system increase

• Reserves in the banking system decrease

• Interest rates decrease

• Interest rates increase

What is the purpose of contractionary monetary policy?

• To decrease interest rates and encourage borrowing

• To stabilize prices and promote employment

• To increase interest rates and discourage borrowing

• To control inflation and reduce government debt

What happens when the Federal Reserve sells government securities?

• Interest rates increase

• Interest rates decrease

• Reserves in the banking system increase

• Reserves in the banking system decrease