Monetary Policy: The Federal Reserve Answers

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1
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The Fed’s use of open market operations affects banks’

i
interest rates.
m
money available to lend.
l
lending practices.
s
stability.
2
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Which of these is a banking activity of the Fed?

p
printing money
r
regulating securities markets
s
storing money for banks
f
funding government programs
4

Which statement describes how borrowers will most likely benefit when the Fed reduces reserve requirements?

A
Loan requirements will likely be relaxed.
B
Interest rates will likely decrease.
C
Housing prices will likely decrease.
D
Investment opportunities will likely improve.
5

best

e
ensure that the government has a balanced budget
i
influence financial institutions globally
e
ensure that the government is sufficiently funded
s
steer the economy away from recession and toward growth
6

lowstablehigh

A
low
B
stable
C
high
8

Which best describes a central bank's primary role?

A
controlling inflation
B
increasing credit
C
printing money
D
creating monetary policy
10

Which statements describe how the Fed responds to high inflation? Check all that apply.

A
It charges banks more interest.
B
It pays banks less interest.
C
It sells more securities.
D
It decreases the money supply.
E
It increases the money supply.

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