Test Your Knowledge
Monetary Policy
Click on the letter choices to test your
understanding
A
B
C
Question 1
• Monetary policy refers to:
A
• The Federal Reserve’s actions to
influence the amount of money
and credit in the U.S. economy
B
• The amount of money printed by
the Bureau of Engraving and
Printing
C
• The actions of Congress and the
President to influence the
economy through changes in tax
policy and government spending
Question 2
• When the U.S. president and Congress make
changes to tax and spending policy, this is
known as:
A
• Monetary Policy
B
•Fiscal Policy
C
•Monetary and Fiscal
Policy
Question 3
• The nation’s monetary policy is conducted by:
A
• The Fed’s Board of Governors
B
• The president and Congress
C
• The Federal Reserve’s Open
Market Committee
Question 4
• The reserve requirement is:
A
B
C
• The most frequently
used tool of monetary
policy
• The ratio of deposits that
banks must hold to cover
demands for liquidity
• Set by the U.S. Congress
Question 5
• The discount rate is:
A
• The interest rate charged
when banks borrow from
the Fed
B
• The interest rate charged
to prime business
customers
C
• Set by commercial banks
Question 6
• Open market operations are conducted by:
A
• The buying and selling of stock in
the open market
B
• Targeting the prime interest rate
C
• The buying and selling of U.S.
Treasuries
Question 7
• If the Federal Reserve buys Treasury
securities:
A
• The money supply will
increase
B
• The money supply will
decrease
C
• Nominal interest rates
will rise
Question 8
• A decrease in the amount of reserves held by
banks:
A
• Decreases the amount of money
and credit in the economy
B
• Will cause interest rates to rise
C
• Both of the above
Question 9
Higher short-term interest rates:
A
• Cause an increase in GDP
B
• Increase employment
C
• May ease inflationary
pressures
Question 10
Why is it important that the Federal Reserve
maintain its independence?
A
• Because it is a part of the
U.S. government
B
• Because the Board of
Governors are elected
officials
C
• To remove election-cycle
influences from
monetary policy
Thank you for participating in
“Test Your Knowledge”