This quiz works best with JavaScript enabled. Home > Economics > Monetary > Policy > Monetary Policy – Quiz 1 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Monetary Policy Quiz 1 (30 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. Federal Reserve Board of Governors members serve ..... terms to help insulate them from political influence. A) 7 years. B) Lifetime. C) 14 years. D) 25 years. Show Answer Correct Answer: C) 14 years. 2. Which is untrue with regards to LIBOR A) Libor has no impact on costs and availability of mortgages. B) Libor determines the costs and availability of mortgages. C) Interbank lending. D) Indicator of trust between anks & reflects the health of ban. Show Answer Correct Answer: A) Libor has no impact on costs and availability of mortgages. 3. If the economy is experiencing rapidly rising prices (high inflation) the Federal Reserve could limit growth in the money supply by: A) Cutting the discount rate. B) Lowering bank taxes. C) Selling government securities. D) Lowering the reserve requirements. Show Answer Correct Answer: C) Selling government securities. 4. Which recent president favored supply-side economics? A) Bill Clinton. B) Richard Nixon. C) Ronald Reagan. D) Jimmy Carter. Show Answer Correct Answer: C) Ronald Reagan. 5. Discount policy affects the money supply by affecting the volume of ..... and the ..... A) Excess reserves; money multiplier. B) Excess reserves; monetary base. C) Borrowed reserves; money multiplier. D) Borrowed reserves; monetary base. Show Answer Correct Answer: D) Borrowed reserves; monetary base. 6. What are the objects that have value, that can be exchanged for something else of value? A) Money Supply. B) Fiat Money. C) Commodity Money. D) Representative Money. Show Answer Correct Answer: D) Representative Money. 7. What money characteristic is being met, by the appearance of the USA currency? A) Acceptability. B) Uniformity. C) Divisibility. D) Portability. Show Answer Correct Answer: B) Uniformity. 8. During an inflation period Central Banks will use A) Expansionary monetary policy. B) Contractionary monetary policy. C) Supply side policy. D) None of above. Show Answer Correct Answer: B) Contractionary monetary policy. 9. Which of the following is NOT an example of money, as defined by M1? A) Traveler's checks. B) A credit card balance. C) Currency. D) A checking account. Show Answer Correct Answer: B) A credit card balance. 10. When bad storms slow the check-clearing process, float tends to ..... causing the Fed to initiate defensive open market ..... A) Increase; sales. B) Decrease; sales. C) Increase; purchases. D) Decrease; purchases. Show Answer Correct Answer: A) Increase; sales. 11. The Federal Funds Rate is: A) The interest rate charged for overnight loans between banks. B) The rate at which the Federal Reserve is able to supply money to its banks. C) The interest rate charged on personal loans. D) None of above. Show Answer Correct Answer: A) The interest rate charged for overnight loans between banks. 12. What is an action of monetary policy? A) Increase spending. B) Borrow money for deficit. C) Reduce taxes. D) Changing reserve requirements. Show Answer Correct Answer: D) Changing reserve requirements. 13. If the economy is suffering from a recessionary gap, the Fed should conduct ..... monetary policy by ..... the money supply. A) Expansionary; decrease. B) Expansionary; increase. C) Contractionary; decrease. D) None of above. Show Answer Correct Answer: B) Expansionary; increase. 14. Monetary policy is designed by A) Government. B) Commercial bank. C) Central bank. D) None of above. Show Answer Correct Answer: C) Central bank. 15. What does NOT happen when the FED alters the Money Supply? A) Interest Rates change. B) Money Value changes. C) Demand changes. D) Production remains the same. Show Answer Correct Answer: D) Production remains the same. 16. If the RR is 10%, the money multiplier will be A) 20. B) 5. C) 25. D) 10. Show Answer Correct Answer: D) 10. 17. Which decision making body in the Federal Reserve meets 8 times a year to determine monetary policy? A) The Regional Bank Presidents Committee. B) The Reserve Banking Advisory Committee. C) The Federal Open Market Committee. D) The Board of Governors of the Federal Reserve. Show Answer Correct Answer: C) The Federal Open Market Committee. 18. What is the amount of money held within the FED & circulated through the economy? A) Fiscal Policy. B) FOMC. C) Monetary Policy. D) Money Supply. Show Answer Correct Answer: D) Money Supply. 19. An increase in the money supply will A) Reduce interest rates and increase aggregate demand. B) Reduce interest rates and decrease aggregate demand. C) Raise interest rates and increase aggregate demand. D) Raise interest rates and decrease aggregate demand. Show Answer Correct Answer: A) Reduce interest rates and increase aggregate demand. 20. If the reserve requirement is 5%, what is the excess reserves on a deposit of $ 5, 000? what is the money multiplier? A) 4750; 20. B) 4500; 25. C) 4000; 50. D) None of above. Show Answer Correct Answer: A) 4750; 20. 21. Money that has no other use then currency is known as A) Commodity based. B) Fiat. C) Paper. D) Elasticity. Show Answer Correct Answer: B) Fiat. 22. Who controls the Money Supply? A) The FED. B) The President. C) The Chairman. D) The Bank. Show Answer Correct Answer: A) The FED. 23. What term is used to describe an increase in the general price of goods? A) Monetary policy. B) Deflation. C) Inflation. D) Stagflation. Show Answer Correct Answer: C) Inflation. 24. If the Fed wants to reduce the amount of loans a bank can make, then it should adjust ..... A) Open Market Operations. B) The Reserve Ratio. C) The Discount Rate. D) None of above. Show Answer Correct Answer: B) The Reserve Ratio. 25. The rate banks charge other banks for a loan A) Federal funds rate. B) Discount rate. C) Reserve ratio. D) Bond rate. Show Answer Correct Answer: A) Federal funds rate. 26. Money that banks do not lend out, and keep in Reserve are effectively not part of the: A) Money supply. B) Pay check. C) National Debt. D) None of above. Show Answer Correct Answer: A) Money supply. 27. How many governors are on the Board of Governors for the Fed? A) 7. B) 5. C) 12. D) 9. Show Answer Correct Answer: A) 7. 28. The tool used the most by the Federal Reserve is A) Changing the reserve requirement rate. B) Open market operations (buy/sell bonds). C) Changing the discount rate. D) None of above. Show Answer Correct Answer: B) Open market operations (buy/sell bonds). 29. Monetary policy is a central bank's actions and communications that manage the ..... A) Discount rates. B) Money supply. C) Aggregate demand. D) None of above. Show Answer Correct Answer: B) Money supply. 30. The Fed's Federal Open Market Committee A) Advises the Fed on the overall health of the economy. B) Is the Fed's primary monetary policymaking body. C) Advises the Fed on consumer credit laws. D) None of above. Show Answer Correct Answer: B) Is the Fed's primary monetary policymaking body. Next →Related QuizzesMonetary QuizzesEconomics QuizzesMonetary Policy Quiz 2Monetary Policy Quiz 3Monetary Policy Quiz 4Monetary Policy Quiz 5Monetary Policy Quiz 6Monetary Policy Quiz 7Monetary Policy Quiz 8Monetary Policy Quiz 9 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books