The Fed: Monetary Policy (3 Tools)

Monetary Policy is the Federal Reserve System's attempt to...

• keep the economy healthy & stable

• control the Federal Government's debt

• manage state governments' spending

• none of these answers are correct.

During a bad economic time, what should the Fed do to stimulate the economy?

• Easy Money Policy

• Tight Money Policy

Which policy would help fight unemployment?

• Easy Money

• Tight Money

Which policy would help fight inflation?

• Easy Money

• Tight Money

Which of these is NOT a monetary policy tool?

• Change the Discount Rate

• Balance Bank Accounts

• Open Market Operations

• Change the Reserve Requirement

Which of these is "Easy Money Policy"?

• Raise the Discount Rate

• Lower the Discount Rate

Lowering the Discount Rate will...

• Force banks to keep more money in their vaults, so they cannot lend as much to customers.

• Encourage banks to borrow $$$ from the Fed, so then there'll be more $$$ put into the economy.

• Discourage banks from borrowing $$$ from the Fed, so then there'll be less $$$ put into the economy.

• Allow banks to keep less money in their vaults, so they can lend more to customers.

Which of these is "Easy Money Policy"?

• Raise the Reserve Requirement

• Lower the Reserve Requirement

Lowering the Reserve Requirement will...

• Force banks to keep more money in their vaults, so they cannot lend as much to customers.

• Encourage banks to borrow $$$ from the Fed, so then there'll be more $$$ put into the economy.

• Discourage banks from borrowing $$$ from the Fed, so then there'll be less $$$ put into the economy.

• Allow banks to keep less money in their vaults, so they can lend more to customers.

Which of these is "Easy Money Policy"?

• Open Market Purchase

• Open Market Sale