Monetary and Fiscal Policy

What is the primary task of the Federal Reserve System?

• To control inflation and encourage full employment

• To print and distribute currency

• To set educational policies

• To manage national parks

In what year was the Federal Reserve System created?

• 2001

• 1913

• 1776

• 1945

What is the main way the Fed controls the money supply?

• By setting the national budget

• By controlling interest rates

• By regulating the stock market

• By printing money

What does the bank reserve requirement determine?

• The number of banks in a region

• The interest rates for student loans

• The CEO's salary

• The amount of money a bank can lend

What is Quantitative Easing?

• A method of reducing taxes

• A strategy to increase bank reserves

• A way to influence the money supply by buying and selling government bonds

• A fitness program for bankers

What effect do low interest rates usually have on the economy?

• They lead to a decrease in investments

• They decrease consumer spending

• They increase the cost of borrowing

• They cause inflation and reduce unemployment

What is fiscal policy?

• The guidelines for creating new money

• The process of electing Federal Reserve officials

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

• The government's use of interest rates to regulate the economy

What are uncontrollables in the federal budget?

• Money set aside for political campaigns

• Funds allocated for emergency situations

• Items that must be spent because they are written into law

• Unexpected expenses

What is the largest chunk of government discretionary spending?

• Education

• Defense

• Environmental protection

• Healthcare for the poor

Why is the Federal Reserve supposed to remain independent?

• To ensure it can throw the best parties

• To prevent it from printing too much money

• To allow it to focus on broader interests than re-election

• To make it easier to regulate the stock market