Monetary Policy

A major function of the Fed is to:

• pass laws to regulate the economy

• lend money to state governments

• manage the supply of currency and bank credit

• issue United States savings bonds to the poor

• all of these

Which action could the Fed take to reduce the problem of recession?

• cutting money spent on social programs

• lowering discount rate

• raising tariffs on foreign imports

• reduce government spending

• all of these

The Fed buys government securities & lowers discount rate. What is the effect?

• economic expansion

• economic contraction

• inflation

• stock market crashes

The FED announces it will lower discount rates to banks. Why would the Fed take this action?

• Fear economy is falling into a recession

• Fear the economy is growing too rapidly

• The Fed has a few of tools to control swings in the economy

• all of these

The Fed issues an order to raise the reserve requirement on banks. What reason for this action?

• Fear economy is falling into a recession

• Fear the economy is growing too rapidly

• The Fed has a few of tools to control swings in the economy

• all of these

The Fed's Open Market Committee sells millions of bonds to private brokers. Reason for action?

• Fear economy is falling into a recession

• Fear the economy is growing too rapidly

• The Fed has a few of tools to control swings in the economy

• all of these

Which of these is NOT an option for the Fed to consider when deciding monetary policy?

• raise or lower reserve requirement

• raise or lower discount rate

• buy or sell U.S. Treasury Bonds

• Taxing both individuals and business corporations alike

If economy grows too rapidly, what is best option for the Fed consider for stabilizing economy?

• increase reserve requirement

• increase discount rate

• sell U.S. Treasury Bonds

• all of these

Economy is in a recession. What should Fed do to increase the money $$$ supply?

• decrease reserve requirement

• decrease the discount rate

• Open Market Committee buy bonds

• all of these

The Fed sells government securities and raises the reserve requirement. What is the effect?

• economic expansion

• economic contraction

• inflation

• stock market crashes