Name __________________________
Quiz Date / due date ______________
The Federal Reserve and Monetary Policy
Principles and Practices of Economics
Chapter 16 Study Guide
Directions: Referring to your text, read pages 415-436, and answer the following questions.
Use this as a reference when studying for the chapter quiz, and be prepared to turn it in for
credit prior to taking the quiz.
Section 1:
1. Is the Federal Reserve System, the nation’s central bank controlled by the government?
_________ (Note – The Federal Reserve System is also known as The Fed)
2. In 1907, Congress was convinced that it had to do something to address the issue of
people not trusting banks. What two issues did the nation’s banking system need to
address?
a.
____________________________________________________________
b.
____________________________________________________________
3. How many regional independent banks make up the Federal Reserve System? _____
4. How many members are on the Federal Reserve’s Board of Governors? ________
5. How long are their terms? ___________
6. How are members chosen to be on the Board of Governors?
7. The actions that the Fed takes to influence the level of real GDP and the rate of inflation
in the economy are known as ________________ ______________.
8. Looking at the map on page 417, where is the closest Federal Reserve Bank city (not
branch) to where we live? ___________________________
9. What does FOMC stand for?
10. The FOMC makes decisions about _________________ rates and the growth of the
United States ____________________ _________________.
11. Where do members of the FOMC come from?
and
Section 2:
12. Describe the four major functions of the Federal Reserve System.
a.
_____________________________________________________________
b.
_____________________________________________________________
c.
_____________________________________________________________
d.
_____________________________________________________________
13. As the Federal Government’s banker, the Fed maintains what type of account for the
treasury department? ______________________________
14. When money is worn, what happens to it?
15. The process by which banks record whose account gives up money, and whose account
receives money when a check is written is known as _____________ ________________
16. The interest rate that the Fed charges for loans to commercial banks is known as the
______________________ rate.
17. Fractional reserve banking means that banks hold just enough money to do what?
___________________________________
18. You learned earlier in the semester about the terms M1 and M2 as they relate to money.
Now we're adding M3, which refers to
19. Too much money in the economy can lead to what? _____________________
20. Who is Alan Greenspan? (hint - look on page 424)
Section 3:
21. When the reserve requirement ratios are reduced, what affect would this have on banks?
(What would they do more of?) ______________________________
22. When the reserve requirement ratios are increased, what affect would this have on banks?
(What would they do less of?) ______________________________
23. The process of buying and selling government securities to alter the supply of money is
known as ___________ ___________________ ____________________.
24. What does the FOMC do when it wants to increase the money supply? _____________
_________________________
25. What does the FOMC do when it wants to decrease the money supply? _____________
_________________________
Section 4:
26. In the money market, when the supply of money is high, the interest rates are
_________________, and when supply is low, rates are ________________.
27. Describe the major problems with the implementation of fiscal and monetary policies.
(Describe what is meant by "lags.")
53. Read the chapter summary on page 436 carefully.
Answer items 1-7 from the Key Terms activity on page 436, by writing the correct matching
term in the appropriate blanks below.
1. _______________________________
5. ________________________________
2. _______________________________
6. ________________________________
3. _______________________________
7. ________________________________
4. _______________________________
International Trade
Chapter 17
Principles and Practices of Economics
Directions: Referring to your text, read pages 441-466, and answer the following questions.
Use this as a reference when studying for the chapter quiz, and be prepared to turn it in for
credit prior to taking the quiz.
Section 1:
1. What factors help to determine what goods and services an economy produces?
a. _____________________________________
b. _________________________ and _________________________
2. How can human capital be measured?
3. When nations specialize, how do they obtain the goods and services they don't or can't
produce? _____________________________________
4. When a nation can produce a particular good at a lower cost than another nation, they
have a(n) _________________________ advantage.
5. When a nation has a lower opportunity cost (they are most efficient) in producing a good
or service, they have a(n) ___________________________ advantage.
6. The law of comparative advantage states that a nation is better off when it produces
goods and services for which it has a(n) ____________________ _________________
7. A good sent to another country for sale is known as an _________________________.
8. A good brought in from another country for sale is known as an ____________________.
9. Which parts of the world are the four main trading partners of the United States?
____________________________, ________________________, _________________,
and _______________________.
10. The United States has a commanding lead in the manufacturing of such products as
____________________________, ____________________________________, and
other advanced technology.
11. Which country is the world's largest exporter? _________________________________
12. Which country is the world's largest importer? _________________________________
Section 2:
13. Why do many people feel that governments should regulate trade?
______________________ These people are known as protectionists.
14. A trade restriction is also known as a ________________ _________________. These
are means of preventing a foreign product or service from entering a nation.
15. A limit on the amount of a good that can be imported is known as an ______________
_______________.
16. A tax on imported goods is known as a _____________________.
17. The use of trade barriers to protect industries from foreign competition is known as
__________________________.
18. Regions where a group of countries agree to reduce or eliminate trade barriers among
themselves are known as _________________ ___________________ ____________.
19. What countries are affected by NAFTA (the North American Free Trade Agreement)?
20. A large corporation that produces and sells goods and services throughout the world is
known as a ______________________________ corporation.
21. Look at the profile on page 457 about Carla Anderson Hills. According to her quote, the
United States has less than _______ % of the population in the world, yet it produces
more than _______ % of the world's output of goods and services.
Section 3:
22. The value of a foreign nation's currency in relation to our country's currency is known as
the _____________________ _______________.
23. The concept of balance of trade is key to understanding the importance of this chapter.
Define balance of trade
24. When a nation exports more than it imports, it has a ____________ ________________.
25. When a nation imports more than it exports, it has a _____________ ________________.
26. When there is a large difference between a nation's imports and exports, there is a trade
______________________.
27. Does the U.S. have a positive or negative trade balance? ______________________
28. Read the chapter summary on page 466 carefully.
Answer items 1-7 from the Key Terms activity on page 466, by writing the correct matching
term in the appropriate blanks below.
1.
___________________________________
2.
___________________________________
3.
___________________________________
4.
___________________________________
5.
___________________________________
6.
___________________________________
7.
___________________________________