Unit 4 Test Review #2: Federal Reserve & Monetary Policy

The interest rate banks charge each other for overnight loans...

• Discount Rate

• Prime Rate

• Federal Funds Rate

• LIBOR

Monetary policy used to stimulate the economy (increase economic growth)

• Increasing the money supply (expansionary monetary policy)

• Decreasing the money supply (contractionary monetary policy)

• Maintaining the current money supply (neutral monetary policy)

• Increasing interest rates to curb inflation

Group members are nominated by the President and confirmed by the Senate

• Board of Governors of the Federal Reserve

• Federal Open Market Committee

• Federal Reserve Bank Presidents

• Federal Advisory Council

Changes in __________ _____ through monetary policy influence how individuals manage their personal finances.

• Inflation rates

• Exchange rates

• Interest rates

• Tax rates

Jill owns a real estate company that sells houses in the local area. She is happy when she hears on the news that the Federal Reserve plans on changing interest rates. What must the Fed be planning on doing to interest rates - raising or lowering them?

• Raising interest rates

• Lowering interest rates

• Keeping interest rates the same

• Increasing property taxes

Purpose of the Federal Reserve...

• to control the money supply through the use of monetary policy

• to regulate the stock market and ensure fair trading

• to provide loans to individuals and businesses directly

• to manage the federal budget and allocate government spending

Monetary policy that is used to lower inflation rates by decreasing the money supply and increasing interest rates is called...

• Contractionary monetary policy

• Expansionary monetary policy

• Accommodative monetary policy

• Neutral monetary policy

This group is made up of the Board of Governors and presidents of the district reserve banks; they are tasked with making recommendations on monetary policy actions.

• Federal Open Market Committee

• Monetary Policy Advisory Board

• Federal Reserve Bank Council

• National Economic Committee