Economic Policy Quiz

What is the Fed?

• An international organization

• A private corporation

• A government agency

• Our central bank

What are the three tools of the Fed?

• Supply-side economics, Keynesian economics, fiscal policy

• Taxation, government spending, borrowing

• Interest rates, inflation, unemployment

• Open market operations, discount rate and reserve requirements

What happens when the Fed lowers interest rates? Raises interest rates?

• It has no effect on borrowing. It has no effect on borrowing

• It increase the cost of loans. Certain types of borrowing can become at least somewhat more affordable

• Certain types of borrowing can become at least somewhat more affordable. It increase the cost of loans

• It decrease the cost of loans. It increase the cost of loans

What is inflation? Why should it concern you?

• An overall increase in prices and fall in the purchasing value of money. It should not concern me because it does not affect my daily life

• A decrease in prices and rise in the purchasing value of money. It should concern me because it affects the economy of the country

• A decrease in prices and rise in the purchasing value of money. It should not concern me because it does not affect my daily life

• An overall increase in prices and fall in the purchasing value of money. It should concern me because inflation this is the economy I am living in and will be more independent in the near future and these prices of goods I will need to buy

What is the name of the Fed's monetary policymaking body?

• Federal Reserve Bank

• Federal Reserve System

• Federal Reserve Board

• FOMC is the federal Open Market Committee

What is the discount rate?

• It is the interest rate the Federal Reserve charges commercial banks and other financial institutions for short term loans

• It is the interest rate the Federal Reserve charges the general public for loans

• It is the interest rate the Federal Reserve charges the government for borrowing money

• It is the interest rate the Federal Reserve pays to commercial banks for keeping their reserves

What is the primary way to create money in the United States?

• Bank deposits

• Government spending

• Foreign investments

• Printing more currency

What is the goal of supply-side economics?

• To promote economic growth through increasing taxes on businesses

• To promote economic growth through increasing government spending

• To promote economic growth through encouraging businesses to increase supply of goods and services

• To promote economic growth through encouraging consumers to increase demand for goods and services

What is the role of government in regulating economic activity?

• To set prices for all goods and services

• To control all aspects of production and distribution of goods and services

• To stabilize the ups and downs of the business cycle

• To eliminate competition in the market

What are the three main goals of the Federal Reserve system?

• Maximize employment, stabilize prices, and moderate long-term interest rates
• Minimize inflation, stabilize employment, and increase short-term interest rates
• Maximize unemployment, stabilize inflation, and decrease long-term interest rates
• Minimize employment, destabilize prices, and increase long-term interest rates