Monetary Policy: The Federal Reserve Answers

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1
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What is the full name of the US central bank, known as the Fed?

t
the Federal Reserve Bank
t
the Federal Deposit Insurance Corporation
t
the Federal Financial Institution
t
the Federal Bank
2
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most likely

B
Borrowing will decrease.
I
Interest rates will decrease.
I
Investing will decrease.
I
Inflation will decrease.
3

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 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.
5

Why is the Fed often referred to as a “lender of last resort,” or the last lender to turn to in a crisis?

I
It lends consumers money when other banks will not.
I
It keeps all failing banks afloat to avoid economic disruption.
I
It helps finance and stabilize central banks internationally.
I
It offers banks financial protection to keep consumers from panicking.
6

Why does the Fed pay interest to banks?

A
It is interest on money held in reserve.
B
It is interest on credit available to the Fed.
C
It is interest on loans taken by the Fed.
D
It is interest on government investments.
7

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

i
interest rates.
m
money available to lend.
l
lending practices.
s
stability.
9

Federal Reserve interest federal fundsloan interest

A
Federal Reserve interest
B
federal funds
C
loan interest
10

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.

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