Monetary Policy Quiz 2 (20 MCQs)

Quiz Instructions

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1. Money that has no other use then currency is known as

Correct Answer: B) Fiat.

2. Who controls the Money Supply?

Correct Answer: D) The FED.

3. What term is used to describe an increase in the general price of goods?

Correct Answer: A) Inflation.

4. If the Fed wants to reduce the amount of loans a bank can make, then it should adjust .....

Correct Answer: B) The Reserve Ratio.

5. The rate banks charge other banks for a loan

Correct Answer: D) Federal funds rate.

6. Money that banks do not lend out, and keep in Reserve are effectively not part of the:

Correct Answer: A) Money supply.

7. How many governors are on the Board of Governors for the Fed?

Correct Answer: B) 7.

8. The tool used the most by the Federal Reserve is

Correct Answer: B) Open market operations (buy/sell bonds).

9. Monetary policy is a central bank's actions and communications that manage the .....

Correct Answer: B) Money supply.

10. The Fed's Federal Open Market Committee

Correct Answer: B) Is the Fed's primary monetary policymaking body.

11. What is coins and paper money considered?

Correct Answer: A) Currency.

12. It is the interest rate that the Fed charges member banks to borrow money for short term loans.

Correct Answer: A) Discount rate.

13. In which city is the Board of Governor's Office located?

Correct Answer: C) Washington D.C.

14. If the federal reserve lowers the reserve requirement, Bobby, a consumer, will more likely

Correct Answer: C) Buy bonds.

15. What is the sustained increase in the average prices of goods and services?

Correct Answer: C) Inflation.

16. When the Fed is conducting open market operations, they are buying or selling

Correct Answer: A) Government bonds.

17. The central bank can reduce the money supply ..... reserve requirements, increasing the discount rate, or ..... bonds in the open market.

Correct Answer: C) Raising/ selling.

18. The central bank of the United States that makes monetary policy for the country is

Correct Answer: A) The Federal Reserve System.

19. The actions of the FED that control and regulate the amount of money in the economy are referred to as

Correct Answer: A) Monetary policy.

20. This is attained through the conduct of monetary policy

Correct Answer: B) Price Stability.