Exploring Monetary Policy through Despicable Me

The video explains monetary policy using the movie 'Despicable Me' as a reference. It covers the role of banks, the impact of interest rates on the economy, and the Federal Reserve's control over the money supply. The video also distinguishes between expansionary and contractionary monetary policies, highlighting their effects on inflation and economic growth. It concludes by discussing the importance of monetary policy in stabilizing the economy.

What is the primary function of banks in the economy?

• To regulate the stock market

• To create money for the government

• To link borrowers with lenders

• To set interest rates for loans

How do banks contribute to the economy according to the video?

• By lending money to businesses and individuals

• By setting the federal funds rate

• By paying taxes

• By printing new money

What happens when interest rates are lowered?

• Consumer spending decreases

• It becomes harder to pay back loans

• Consumer and business spending increase

• The economy immediately enters a recession

What effect do high interest rates have on business investment?

• Causes businesses to invest less

• Has no impact on business decisions

• Increases investment in new technologies

• Leads to higher consumer spending

What role do interest rates play in the economy?

• They determine the stock market value

• They control the national debt

• They influence consumer and business spending

• They regulate international trade

Who is responsible for controlling the money supply in the United States?

• The Federal Reserve

• The Treasury Department

• Commercial Banks

• The President

What does the Federal Reserve use to signal the health of the economy?

• Consumer confidence surveys

• Target interest rates

• The stock market index

• The unemployment rate

What is the main goal of contractionary monetary policy?

• To increase unemployment

• To decrease the GDP

• To fight inflation

• To increase consumer spending

What is expansionary monetary policy intended to do?

• Expand the economy

• Decrease the money supply

• Fight deflation

• Increase interest rates

What is the Federal Reserve's approach to managing inflation?

• Increasing government spending

• Lowering taxes

• Using contractionary monetary policy

• Expanding the workforce