ECON - Unit 5 Practice Test

If you were short of cash and needed a short term loan, which of the following would be your worst choice of a source for a loan.

• local bank

• credit union

• pay day lender

• credit card cash advance

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.

The goals of monetary policy do NOT include the promotion of _________________.

• Maximum employment

• Stable prices

• Moderate long-term interest rates

• Low taxes

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

Which of the following is NOT one of the functions of the Federal Reserve?

• Performing banking functions for private banks

• Setting tax rates for Corporate banks

• Regulating banks

• Conducting monetary policy.

Suppose the Fed wanted to engage in an expansionary monetary policy, which of the following should it do?

• Buy stocks on the stock market

• Increase the tax on bank profits.

• Decrease the administered interest rates

• Make it harder for banks to loan money to businesses.

Federal Reserve Board of Governors members are appointed by the ____________ and confirmed by the ____________.

• state governors, Supreme Court

• House of Representatives, Senate

• Senate, President

• President, Senate

Monetary policy refers to what the Federal Reserve does to influence the amount of __________ and __________ in the U.S. economy.

• Interest and debt

• Currency and gold reserves

• Money and credit

• Taxes and revenue

What do Fed member banks do with customer deposits?

• They use them to conduct monetary policy.

• They use them to enforce wage-price controls.

• They keep a portion as legal reserves and loan out a portion at interest.

• They use a portion to calculate interest rates and keep a portion as legal reserves.

How can a cardholder avoid paying interest on a credit card?

• Do not pay anything
• Pay the minimum payment after its due date
• Pay the minimum balance every month
•  Pay the balance in full every month