Deck 15: Monetary Policy, Financial Regulation, and Debates Over Monetary Policy

Question 1

Monetary policy may be defined as

A) a policy designed to increase or decrease the flow of money and credit.
B) a policy designed to increase or decrease the ability of consumers to spend money.
C) a policy designed to increase the convertibility of paper money into gold.
D) a policy designed to develop money that is more resistant to counterfeiters.

Answer 1

A

Question 2

The central bank of the United States is called

A) the Bank of America.
B) the U.S. Bank.
C) the Central Bank of the United States.
D) the Federal Reserve.

Answer 2

D

Question 3

The Board of Governors of the Federal Reserve are

A) appointed for life like Supreme Court Justices.
B) elected by the governors of the 50 states.
C) appointed by the Senate and confirmed by the Supreme Court.
D) appointed by the President and confirmed by the Senate.

Answer 3

D

Question 4

Monetary policy is conducted by

A) the Banking Committee of Congress.
B) the President's Council of Economic Advisers.
C) the Federal Open Market Committee.
D) Chamber of Commerce.

Question 5

The function of the Federal Deposit Insurance Corporation is to

A) conduct monetary policy.
B) issue new currency and coin.
C) insure loans made by members of Congress.
D) insure bank deposits.

Question 6

The Federal Reserve makes loans to individual banks at an interest rate

A) called the federal funds rate.
B) called the discount rate.
C) called the prime rate.
D) called the rate of last resort.

Question 7

During a recession, the Federal Reserve may try to lower interest rates by

A) increasing the required reserve ratio.
B) selling government bonds to banks or individuals.
C) buying government bonds from banks or individuals.
D) sending directives to bank officials.

Question 8

During inflationary periods, the Federal Reserve can be expected to

A) try to lower interest rates.
B) try to raise interest rates.
C) try lend more reserves to banks.
D) try to lower the required reserve ratio.

Question 9

The interest rate that banks charge each other for overnight loans is called

A) the prime rate.
B) the federal funds rate.
C) the discount rate.
D) the penalty rate.

Question 10

How do taxes affect income inequality?

A) Taxes have no effect on income inequality.
B) Taxes tend to reduce income inequality, because only about 40% of taxes are progressive.
C) Taxes tend to increase income inequality, because only about 40% of taxes are regressive.
D) Taxes tend to reduce income inequality, because only about 40% of taxes are proportional.