Test Your Knowledge Monetary Policy Click on the

Test Your Knowledge Monetary Policy Click on the letter choices to test your understanding A B C

Question 1 • Monetary policy refers to: A • The Federal Reserve’s actions to influence the amount of money and credit in the U. S. economy B • The amount of money printed by the Bureau of Engraving and Printing C • The actions of Congress and the President to influence the economy through changes in tax policy and government spending

Question 2 • When the U. S. president and Congress make changes to tax and spending policy, this is known as: A • Monetary Policy B • Fiscal Policy C • Monetary and Fiscal Policy

Question 3 • The nation’s monetary policy is conducted by: A • The Fed’s Board of Governors B • The president and Congress C • The Federal Reserve’s Open Market Committee

Question 4 • The reserve requirement is: A B C • The most frequently used tool of monetary policy • The ratio of deposits that banks must hold to cover demands for liquidity • Set by the U. S. Congress

Question 5 • The discount rate is: A • The interest rate charged when banks borrow from the Fed B • The interest rate charged to prime business customers C • Set by commercial banks

Question 6 • Open market operations are conducted by: A • The buying and selling of stock in the open market B • Targeting the prime interest rate C • The buying and selling of U. S. Treasuries

Question 7 • If the Federal Reserve buys Treasury securities: A • The money supply will increase B • The money supply will decrease C • Nominal interest rates will rise

Question 8 • A decrease in the amount of reserves held by banks: A • Decreases the amount of money and credit in the economy B • Will cause interest rates to rise C • Both of the above

Question 9 Higher short-term interest rates: A • Cause an increase in GDP B • Increase employment C • May ease inflationary pressures

Question 10 Why is it important that the Federal Reserve maintain its independence? A • Because it is a part of the U. S. government B • Because the Board of Governors are elected officials C • To remove election-cycle influences from monetary policy

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