Econ: Monetary Policy - Crash Course #10

Who is Janet Yellen, and why is she considered so influential?

• She manages the stock market

• She sets U.S. tax policy

• She chaired the Federal Reserve, whose decisions affect the global economy

• She led the Treasury Department

What is the Federal Reserve commonly called?

What are the two primary roles of most central banks?

• Regulating commercial banks and managing government spending.

• Regulating commercial banks and conducting monetary policy.

• Setting tax rates and overseeing international trade.

• Providing loans to individuals and managing national debt.

An interest rate is:

• The amount of money banks hold in reserve

• The government’s tax on income

• The difference between imports and exports

• The price of borrowing money

If the Fed can’t set consumer interest rates directly, how does it influence them?

• By controlling Congress

• By regulating wages

• By regulating wages

• By setting fiscal policy

When interest rates are high, what happens?

• Borrowing and spending decrease

• Borrowing and spending increase

• The money supply increases

• nflation falls automatically

How does an increase in the money supply typically affect interest rates?

• It causes interest rates to increase due to higher demand for money.

• It causes interest rates to decrease due to more money available for lending.

• It has no direct effect on interest rates.

• It causes interest rates to fluctuate unpredictably.

If the Fed increases the money supply to speed up the economy,

that’s called __________.

If the Fed decreases the money supply to slow the economy,
that’s called __________.

• Loose Fiscal Policy

  
  

  Tight Fiscal Policy

• Expansionary
  Monetary Policy

  Contractionary Monetary Policy

• Fiscal Policy
  
  
  Monetary Policy

• Inflationary Policy

  Deflationary Policy

In the late 1970s, Fed Chair Paul Volcker fought high inflation by:

• Increasing taxes

• Printing more money

• Banning credit cards

• Decreasing the money supply to raise interest rates

Why did so many banks fail during the Great Depression?

• They lacked liquidity and people lost confidence, causing bank runs

• The government seized deposits

• The Fed raised reserve requirements too high

• Banks made too much profit