Crash Course:Monetary and Fiscal Policy Quiz

What is the primary task of the Federal Reserve System?

• To regulate state and local banks

• To oversee international trade

• To manage the stock market

• To control the money supply

When was the Federal Reserve System created?

• 1929

• 1913

• 1945

• 1900

Which of the following is NOT a function of the Federal Reserve?

• Clearing checks

• Supplying currency

• Regulating international trade

• Setting interest rates

What is the discount rate?

• The interest rate the Fed charges banks for loans

• The interest rate for mortgages

• The interest rate banks charge each other

• The interest rate for consumer loans

What is fractional reserve banking?

• Banks not holding any reserves

• Banks holding all deposits in reserve

• Banks holding a fraction of deposits in reserve

• Banks lending out all deposits

What happens when the Fed sells government bonds?

• Money is taken out of the economy

• Inflation increases

• Money is added to the economy

• Interest rates decrease

What is inflation?

• A general rise in prices

• A decrease in the money supply

• An increase in unemployment

• A decrease in interest rates

What is fiscal policy?

• The government's ability to control the money supply

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

• The Federal Reserve's ability to set interest rates

• The Federal Reserve's ability to regulate banks

What is the main reason for budget deficits?

• High employment rates

• High interest rates

• Low inflation

• Spending more money than raised in taxes

What are uncontrollables in the federal budget?

• Education spending

• Discretionary spending items

• Defense spending

• Mandatory spending items