Answers26-27 Ignite Economics-KY-EconomicsInflation and Stagflation (continued)

Monetary Policy: The Federal Reserve Answers

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If the domino effect occurs as a result of changes in the money supply, what will most likely happen as an immediate result of banks having more money to lend?

A
Borrowing will decrease.
B
Interest rates will decrease.
C
Investing will decrease.
D
Inflation will decrease.
2
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Which best describes a central bank's primary goals?

A
limiting inflation and reducing unemployment
B
reducing unemployment and maintaining cash flow
C
controlling stagflation and reducing unemployment
D
managing credit and ensuring the money supply's liquidity
3

When the Fed adjusts its interest rate, it directly influences consumer

A
saving.
B
spending.
C
borrowing.
D
investing.
4

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.
5

Which best describes what a central bank uses monetary policy to do?

A
ensure that the government has a balanced budget
B
influence financial institutions globally
C
ensure that the government is sufficiently funded
D
steer the economy away from recession and toward growth
6

Economists studying the money supply categorize the status of the money based on

A
interest rates.
B
liquidity.
C
inflation rates.
D
credit.
7

Which statement best describes how the Fed responds to recessions?

A
It sells more securities.
B
It charges banks more interest.
C
It increases reserve requirements.
D
It increases the money supply.
8

In how many cities are Federal Reserve district banks located?

A
4
B
12
C
50
D
8
9

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

A
the Federal Reserve Bank
B
the Federal Deposit Insurance Corporation
C
the Federal Financial Institution
D
the Federal Bank
10

ContractionaryExpansionaryFixed

A
Contractionary
B
Expansionary
C
Fixed

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