Monetary Policy Quiz 4 (20 MCQs)

Quiz Instructions

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1. Which action would most likely increase the excess reserves of commercial banks?

Correct Answer: C) The central bank buys bond from commercial banks.

2. If you want to slow down the economy, the Fed can ..... the money supply by ..... interest rates.

Correct Answer: B) Decrease, increasing.

3. What does each dollar bill have to show that its not fake?

Correct Answer: B) Serial Number.

4. What is the generally the most important role of the Federal Reserve performs?

Correct Answer: C) Overseeing monetary policy.

5. What do we call the funds that the banks keep with RBI as a portion of their Net Demand and Time Liabilities?

Correct Answer: B) Cash Reserve Ratio.

6. The main objective of monetary policy in India is ..... :

Correct Answer: A) Growth with Stability.

7. During inflationary period, central bank will use

Correct Answer: B) Contractionary monetary policy.

8. What is the goal of contractionary monetary policy?

Correct Answer: B) To decrease the money supply to slow down the economy.

9. What does the FED NOT do?

Correct Answer: B) Sets & controls budget.

10. Which of the following is not a goal of fiscal and monetary policy?

Correct Answer: B) Investment in human capital.

11. What happens to the money circulation, when the FED orders a tight/ contractionary money policy?

Correct Answer: B) Less money is put into circulation.

12. What is Price stability

Correct Answer: D) All of the above.

13. Which of the following is NOT one of the three parts of the Federal Reserve?

Correct Answer: A) The Consumer Financial Protection Bureau.

14. What happens to interest rates under a easy money policy?

Correct Answer: B) Decrease.

15. "The Fed" is the nickname for the:

Correct Answer: A) Federal Reserve Bank of the United States.

16. Finish the statement:Monetary policy affects the ....., primarily through changing .....

Correct Answer: A) Money supply, interest rates.

17. How many districts (and, therefore, regional reserve banks) make up the Federal Reserve system?

Correct Answer: C) 12.

18. If the Fed institutes a policy to reduce inflation, which of the following is most likely to increase?

Correct Answer: C) Interest rates.

19. It is the interest rate that banks charge each other for short term loans

Correct Answer: C) Federal Funds Rate.

20. The Federal Reserve will lower reserve requirement, lower the discount rate and buys bonds when?

Correct Answer: B) The economy needs to expand.