Monetary Policy and the Federal Reserve Quiz

What is the main job of the central banks like The Fed and the European Central Bank?

• Conduct fiscal policy

• Set tax rates

• Regulate and oversee commercial banks

• Issue government bonds

What is the price of borrowing money called?

• Principal

• Inflation rate

• Interest rate

• Profit percentage

What happens to borrowing and spending when interest rates are low?

• Borrowing increases, spending decreases

• Borrowing decreases, spending decreases

• Borrowing increases, spending increases

• Borrowing decreases, spending increases

What is the term for increasing the money supply to speed up the economy?

• Contractionary Monetary Policy

• Expansionary Monetary Policy

• Fiscal Policy

• Quantitative Easing

What did The Fed do to speed up the economy after the Dot Com bust and 9-11?

• Decreased the money supply

• Increased the discount rate

• Increased the money supply

• Increased the reserve requirement

What is the term for buying or selling short term government bonds to change the money supply?

• Fractional Reserve Banking

• Discount Rate

• Open Market Operations

• Quantitative Easing

What did The Fed do during the 2008 financial crisis to boost the economy?

• Increased the reserve requirement

• Implemented Quantitative Easing

• Decreased government spending

• Increased taxes

What is the term for the amount of deposits that banks are required to hold in reserves?

• Reserve Requirement

• Excess Reserves

• Discount Rate

• Principal

Why did the actual inflation rate stay low despite The Fed increasing the money supply since 2008?

• Banks haven't loaned out the money

• Stricter lending regulations

• Uncertainty in Europe

• All of the above

What is the main tool used by The Fed to increase or decrease the money supply?

• Fractional Reserve Banking

• Discount Rate

• Quantitative Easing

• Open Market Operations