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

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Question #1
The Federal Open Market Committee consists of
A.   the President of the United States and the Board of Governors.
B.   Congresspeople, Senators, and the Board of Governors.
C.   the Secretary of the Treasury and the Board of Governors.
D.   the Board of Governors and five district bank presidents.
Question #2
The Federal Reserve System functions as America's
A.   tax collector.
B.   central bank.
C.   stock and bond market.
D.   savings bank.
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 affect the money supply.
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.   acts when a majority of member banks agree on policy and the banks rarely agree.
B.   does not know how banks will respond to discount rate changes.
C.   earns interest on discounting and cannot afford to lose the revenue.
D.   has been directed by Congress to set the discount rate at a permanent level.
Question #5
If the Fed raises the discount rate, what happens to reserves and the money supply?
A.   Reserves increase and the money supply decreases.
B.   Both increase.
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.   revenues.
C.   lending.
D.   reserves.
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 depends on the value of interest rates.
B.   It would increase.
C.   It would decrease.
D.   It would remain unchanged.
Question #8
In reality, commercial banks are ____ of the district Federal Reserve Banks.
A.   regulators
B.   managers
C.   competitors
D.   customers
Question #9
The Fed's principle objective is to
A.   manage the money supply and interest rates.
B.   collect tax revenues.
C.   supervise the business decisions of banks.
D.   make profits to pay into the U.S. Treasury.
Question #10
The Fed cannot predict the effects of open market operations with perfect accuracy because of
A.   foreigners desire to hold U.S. dollars.
B.   All of these are correct.
C.   banks' desire to hold excess reserves.
D.   changes in people's desire for cash.

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