Question

Question 1

The Federal Reserve System is the central bank of the United States, an institution established by the Federal Reserve Act of 1913, the parameters of which can be amended by Congress. As a central bank, the key functions of the Fed are:

-To advise the President and Congress on economic policy.

-To conduct fiscal and monetary policy.

-To conduct monetary policy, support financial system stability and provide banking services to banks and the federal government.

-To manage and monitor the money supply.

Question 2

The Fed’s policy decisions ______ approval.

-require congressional

-require the President's

-do not require

Question 5

In the event of a covered bank’s failure, federal deposit insurance guarantees that depositors will receive up to _____ of the dollar amount in an account.

-$100,000

-$250,000

-$500,000

Question 7

Open market operations consist of the purchase or sale of U.S. government securities.

-True

-False

Question 8

Although open market operations are intended to influence bank reserves, the money supply and interest rates, the direct impact is on the:

-discount rate.

-federal funds rate.

-prime rate.

Question 9

The Fed’s purchase of bonds _____ the money supply and _____ interest rates.

-decreases; raises

-increases; lowers

Question 1

If the Fed lowers the discount rate, the money supply will _____ and market interest rates will _____.

-decrease; increase

-increase; decrease

Question 12

An expansionary monetary policy will shift the supply of loanable funds to the _____, _____ the interest rate.

-left; increasing

-right; decreasing

Question 13

A contractionary monetary policy would be expected to _____ business investment, consumer borrowing and overall AD.

-decrease

-increase

Question 14

Monetary policy should be:

-cyclical.

-countercyclical.

Question 15

The term quantitative easing is synonymous with open market operations.

-True

-False

Answer 1

1.As a central bank, the key functions of the Fed are:

-To conduct monetary policy, support financial system stability and provide banking services to banks and the federal government.

-To manage and monitor the money supply.

2.The Fed’s policy decisions do not require approval.

5.In the event of a covered bank’s failure, federal deposit insurance guarantees that depositors will receive up to $250,000 of the dollar amount in an account.

7.Open market operations consist of the purchase or sale of U.S. government securities.

True;Fed's purchase of government securities is known as expansionary monetary policy and also sale of government securities is known as contractionary monetary policy.

8. Although open market operations are intended to influence bank reserves, the money supply and interest rates, the direct impact is on the: federal funds rate.

9.The Fed’s purchase of bonds increase the money supply and lowers interest rates.

11.If the Fed lowers the discount rate, the money supply will increase and market interest rates will decrease.

12.An expansionary monetary policy will shift the supply of loanable funds to the right,decreasing the interest rate.

13.A contractionary monetary policy would be expected to decrease business investment, consumer borrowing and overall AD.

14.Monetary policy should be: countercyclical .

15.The term quantitative easing is synonymous with open market operations.

True;Quantitative Easing is achieved through Open Market Operations . Basically they are the same thing. The difference is that with QE the amount of money to be created is pointed out in advance and it will be a massive quantity.