Monetary Policy: The Federal Reserve example #27200

12 August 2023
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13 test answers

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question
In how many cities are Federal Reserve district banks located?
answer
12
question
monetary policy involves decreasing the money supply.
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Contractionary
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Why does the Fed pay interest to banks?
answer
It is interest on money held in reserve.
question
Which best describes what a central bank uses monetary policy to do?
answer
steer the economy away from recession and toward growth
question
What is the full name of the US central bank, known as the Fed?
answer
the Federal Reserve Bank
question
Which of these is a banking activity of the Fed?
answer
storing money for banks
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Which statement best describes how the Fed's use of open market operations affects banks?
answer
It affects banks' liquidity.
question
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?
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Interest rates will decrease.
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What is a potential negative effect of an expansionary policy?
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increased inflation
question
Why is the Fed often referred to as a "lender of last resort," or the last lender to turn to in a crisis?
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It offers banks financial protection to keep consumers from panicking.
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Which statement best describes how the Fed responds to recessions?
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It increases the money supply.
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Economists studying the money supply categorize the status of the money based on
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liquidity.
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The ... rate is the interest rate banks charge each other for borrowing or storing money.
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federal funds