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

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