Econ 102 - Principles of Macroeconomics » Fall 2022 » Monetary Policy Quiz

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Question #1
The Federal Open Market Committee consists of
A.   Congresspeople, Senators, and the Board of Governors.
B.   the Board of Governors and five district bank presidents.
C.   the President of the United States and the Board of Governors.
D.   the Secretary of the Treasury and the Board of Governors.
Question #2
The Federal Reserve System functions as America's
A.   central bank.
B.   savings bank.
C.   tax collector.
D.   stock and bond market.
Question #3
Bank lending and deposits tend to change as interest rates change. Can the Fed counteract this tendency?
A.   No, the Fed is forbidden by the Constitution from intervening in the economy.
B.   No, the Fed almost always follows a passive monetary policy.
C.   Yes, through its ability to change tax levels.
D.   Yes, through its ability to affect the money supply.
Question #4
The reason that the Fed does not actively use discount rate policy to control the money supply is because the Fed
A.   acts when a majority of member banks agree on policy and the banks rarely agree.
B.   earns interest on discounting and cannot afford to lose the revenue.
C.   has been directed by Congress to set the discount rate at a permanent level.
D.   does not know how banks will respond to discount rate changes.
Question #5
If the Fed raises the discount rate, what happens to reserves and the money supply?
A.   Both decrease.
B.   Reserves decrease and the money supply increases.
C.   Reserves increase and the money supply decreases.
D.   Both increase.
Question #6
Open Market operations have their initial effect on bank
A.   revenues.
B.   reserves.
C.   lending.
D.   profits.
Question #7
If the Fed raises the reserve requirement on deposits from 15 percent to 20 percent, what would happen to the money supply?
A.   It would decrease.
B.   It would remain unchanged.
C.   It would increase.
D.   It depends on the value of interest rates.
Question #8
In reality, commercial banks are ____ of the district Federal Reserve Banks.
A.   customers
B.   competitors
C.   regulators
D.   managers
Question #9
The Fed's principle objective is to
A.   make profits to pay into the U.S. Treasury.
B.   collect tax revenues.
C.   manage the money supply and interest rates.
D.   supervise the business decisions of banks.
Question #10
The Fed cannot predict the effects of open market operations with perfect accuracy because of
A.   changes in people's desire for cash.
B.   banks' desire to hold excess reserves.
C.   foreigners desire to hold U.S. dollars.
D.   All of these are correct.

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