Monetary Policy and the Federal Reserve

What is the primary function of the Federal Reserve in the United States?

• Collecting federal taxes.

• Regulating international trade agreements.

• Influencing the nation's money supply.

• Managing the national debt through direct spending.

In terms of economic influence within the United States, how is the Chairperson of the Federal Reserve often ranked?

• The most powerful person.

• The second most powerful person, after the President.

• Less powerful than the Speaker of the House.

• Equal in power to the Secretary of the Treasury.

According to the Quantity Theory of Money, if the money supply (M) increases in the long run, what is the expected outcome for prices (P) and real GDP (Y)?

• Prices decrease, real GDP increases.

• Prices increase, real GDP remains unchanged.

• Prices remain unchanged, real GDP increases.

• Both prices and real GDP decrease.

Which of the following factors can make the Federal Reserve's ability to affect aggregate demand in the short run challenging?

• The Fed's direct control over individual consumer spending.

• Complete and immediate availability of economic data.

• Lagged results and a lack of direct control over certain economic variables.

• The inability to create money or buy government bonds.