Banking and Interest Rates

If the Federal Reserve wanted to stimulate the U.S. economy and reduce unemployment, it would

• cause interest rates to decrease because low interest rates encourage business growth and expansion.

• cause interest rates to rise because high interest rates encourage business growth and expansion.

• increase the administered interest rates, which would increase the money supply.

• increase consumer spending by reducing the money supply.

What is the primary function of the Federal Reserve?

• To regulate the stock market

• To control the nation's money supply and stabilize the economy

• To manage the national debt

• To oversee the banking industry

The headline below indicates (a)   policy:

"Fed unleashes another big rate hike in bid to curb inflation"

• Fiscal policy

• Monetary policy

Monetary policy decisions are made by (a)  

• Congress

• Senate

• The Fed

• President

The action by the FED to adjust the size of the money supply, and to adjust interest rates in order to keep prices down and employment high.

• fiscal policy

• monetary policy

In order to help the economy grow, the FED may____________the reserve requirement, allowing banks to loan more people money so that they spend more

• lower

• raise

• ignore

• end

In order to slow the economy, the FED may____________ the reserve requirements and there will be less money to loan out to people.

• increase

• decrease

• spend more

• tax more

What is the primary purpose of interest rates in an economy?

• To control inflation and stabilize the currency

• To increase government revenue

• To regulate international trade

• To promote technological innovation

Which of the following is a likely effect of high interest rates on consumer behavior?

• Increased borrowing and spending

• Decreased savings

• Reduced borrowing and spending

• Increased investment in stocks

How do central banks typically respond to high inflation?

• By lowering interest rates

• By raising interest rates

• By printing more money

• By reducing taxes