Why does the Federal Reserve alter monetary policy?

to lessen the effect of natural business cycles

What effect would an increase in the discount rate have on the money supply?

it would cause the money supply to contract

What is the relationship between interest rates and demand for money

As interest rates decrease, demand for money increases.

Which of these situations is most likely to cause the Fed to introduce a tight money supply

Economy is expanding quickly and inflation is a concern

Why did the government start the Federal Reserve system

to give consumers access to funds for business expansion

What is the role of the FOMC

makes decisions about interest rates and money supply

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The Federal Reserve

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Questions 22

Answers

1
the fraction of deposits that banks must keep on hand
federal funds rate
prime rate
open market operations
required reserve ratio
2
Why does the Federal Reserve alter monetary policy?
to provide services to member banks
to lessen the effect of natural business cycles
to enable banks to clear checks
to regulate the banking industry
3
rate of interest banks charge on short-term loans to their best customers
prime rate
required reserve ratio
easy money policy
tight money policy
4
the seven-member group that oversees the Federal Reserve System
Board of Governers
Federal Reserve Districts
OPEC
FOMC
5
How many Federal Reserve Districts are there
9
10
15
12
6
What is the cost of money?
the bank's use of money creation
the economy's use of open market operations
the smoothing out of fluctuations in the market
the price of the interest rate
7
What effect would an increase in the discount rate have on the money supply?
it would cause the money supply to contract
it would cause the money supply to expand
it would increase the money multiplier
it would have no effect on the money supply
8
the process by which banks record whose account gives up money and whose account receives money
open market operations
check clearing
easy money policy
tight money policy
9
As commercial banks keep more excess reserves, money creation...
could either increase or decrease
increases
decreases
remains the same
10
What is the relationship between interest rates and demand for money
Interest rates and demand for money are unrelated.
Interest rates are determined by demand for money.
As interest rates decrease, demand for money increases.
As interest rates increase, demand for money increases.
11
monetary policy that increases the money supply
tight money policy
open market operations
prime rate
easy money policy
12
Which of these situations is most likely to cause the Fed to introduce a tight money supply
recession has reduced aggregate demand and high unemployment
economy is prosperous with low inflation & low unemployment
the federal gov passes a new budget with a large deficit
Economy is expanding quickly and inflation is a concern
13
the buying and selling of government securities to alter the supply of money
net worth
open market operations
check clearing
federal funds rate
14
Why did the government start the Federal Reserve system
to make sure that banks were obeying banking laws
to keep the banking power spread out
to have a place for banks to deposit their excess deposits
to give consumers access to funds for business expansion
15
How quickly can an increase in government spending increase GDP?
3 months
one month
one week
6 months
16
interest rate banks charge each other for loans
net worth
required reserve ratio
prime rate
federal funds rate
17
total assets minus total liabilities
net worth
check clearing
prime rate
federal funds rate
18
What policy does the Fed use to counteract a contraction
tight money policy
policy lags
easy money policy
fiscal policy
19
What policy does the Fed use to counteract an expansion that is causing high interest rates
fiscal policy
tight money policy
easy money policy
policy lags
20
What is the role of the FOMC
redraws the maps of the districts
Reports info from each Federal district to the Board of Gov
7 members; picked by prez; oversees the Fed
makes decisions about interest rates and money supply
21
How can the Fed encourage banks to lend out more of their reserves
reduce the discount rate
raise the required amount of reserve
increase the prime rate
reduce the money supply
22
Which of the following instruments is NOT used by the Federal Reserve to change money supply
the discount rate
the required reserve ratio
the federal tax code
open market operations

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