QUIZ 2

IMBA
Economics

Note: Please upload before 11:50 on Moodle.

1--2. Money in the United States consists of ?

3—6. What are the Fed’s goals ?

7--9. Seeing the right three gray area, what are the three RECESSION periods after
Year 2000, respectively?

10. In recession periods, Fed will use ___________monetary policy.

A. tightening
B. expansionary

11--14. What are the four main effects of an Expansionary Monetary Policy?

15. If required reserve ratio is10%, how much is the money multiplier?

16. the Federal Reserve can increase liquidity by buying government bonds, ______
the federal funds rate.
A. Increases
B. Decreases.
17. What is QE policy?

18--21: What are Money four main functions?

22. The above figure shows the effects of an open market _____on the balance sheets
of the Fed and the Bank.
A. Purchase
B. Sell.

23. when a Fed wants to keep inflation under control by using _____monetary policy.
A. tightening
B. expansionary

24. If there has been too much spending and borrowing by consumers and businesses,
the economy can become overheated and that could considerably using
_____monetary policy.
A. tightening
B. expansionary

25--26. The Federal Open Market Committee (FOMC) meets every _____weeks, that
is , ____times a year to determine the federal funds target rate.
27. the Federal Reserve decreases liquidity by ______government bonds.
A. selling.
B buying.

28. In the market for bank reserves, if the federal funds rate target is higher than the
federal funds rate, the Fed will take action to ________ reserves.
A) decrease the supply of
B) increase the supply of
C) increase the demand for
D) decrease the demand for

29. If the Fed sells U.S. government securities

A) the federal funds rate rises.
B) the U.S. Treasury gains some revenue.
C) bank reserves increase.
D) None of the above answers is correct.

30. Which of the following is a potential monetary policy instrument for the Fed?
A) federal funds rate
B) government budget deficit
C) income tax rates
D) profit rates

31. The federal funds rate is the interest rate

A) banks charge each other on overnight loans.
B) on the 3-month Treasury bill.
C) on the 30-year treasury bond.
D) that the Fed charges commercial banks on loans.

32. If the Fed carries out an open market operation and sells U.S. government
securities, as long as the federal funds interest rate remains within the corridor the
federal funds rate ________ and the quantity of reserves ________.
A) falls; increases
B) rises; increases
C) falls; decreases
D) rises; decreases
33. If the Fed carries out an open market operation to buy U.S. government securities,
if the federal funds rate stays in the corridor the federal funds rate ________ and the
quantity of reserves ________.
A) falls; increases
B) rises; increases
C) falls; decreases
D) rises; decreases

34. To lower the federal funds rate, the Federal Reserve could
A) buy government securities.
B) raise the Treasury bill rate.
C) raise the exchange rate.
D) decrease bank reserves.

35. The Fed uses three policy tools to manipulate the money supply: _____, which
affect reserves and the monetary base; changes in _____, which affect reserves and
the monetary base by influencing the quantity of discount loans; and changes in
_____, which affect the money multiplier.

(a) open market operations; the discount rate; margin requirements

(b) open market operations; the discount rate; reserve requirements
(c) the discount rate; open market operations; margin requirements
(d) the discount rate; open market operations; reserve requirements

36. The Fed uses three policy tools to manipulate the money supply: open market
operations, which affect the _____; changes in the discount rate, which affect the
_____ by influencing the quantity of discount loans; and changes in reserve
requirements, which affect the _____.
(a) money multiplier; monetary base; monetary base
(b) monetary base; money multiplier; monetary base
(c) monetary base; monetary base; money multiplier
(d) money multiplier; money multiplier; monetary base

37. Please define Required Reserve Ratio.

38. Please define the discount rate.

39. ______ is used in the economy and control inflation by slowing the economy
down.
A. tight monetary policy.
B. Expansionary monetary policy

40. If the FOMC believes the economy is growing too fast and inflation pressures are
inconsistent with the dual mandate of the Federal Reserve, the Committee may set a
______federal funds rate target to temper economic activity.
A. Higher
B. Lower.