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Econ- Chapter 15
Test Description: Fed
Instructions: Answer all questions to get your test result.
1) Monetary policy that makes credit expensive and in short supply is called:
A
Right monetary policy
B
Loose monetary policy
C
Tight monetary policy
D
Light monetary policy
2) Regulation set by the Fed requiring banks to keep a certain percentage of their deposits in cash is called:
A
Check deposits
B
Check clearing
C
Reserve requirements
D
Deposit requirements
3) Monetary policy that makes credit inexpensive and abundant is called:
A
Right
B
Tight
C
Light
D
Loose
4) A system in which only a fraction of the deposits in a bank is kept on hand is called:
A
Monetary policy
B
Fractional reserve banking
C
Fractional deposits
D
Reserve requirements
5) Which of the following is a result of a loose monetary policy?
A
People are unwilling to borrow money
B
Businesses postpone expansion
C
Consumers hesitate to buy new homes
D
People are willing to borrow money
6) Which of the following is a result of a tight monetary policy?
A
Businesses postpone expansion
B
Consumers buy new homes
C
People are willing to borrow money
D
Businesses expand
7) Why would a country want a tight monetary policy?
A
Encourage economic growth
B
Increase consumer spending
C
Control inflation
D
Decrease the value of the dollar
8) Fractional reserve banking makes it possible for banks to:
A
Process checks
B
Use some deposits to make loans
C
Keep all deposits in reserve
D
Keep no cash in their vaults
9) The buying and selling of U.S. securities by the Fed to affect the money supply is called:
A
Open-market operations
B
Federal Funds rate
C
Discount rate
D
Prime rate
10) The rate of interest that banks charge on loans to their best business customers is called:
A
Open-market operations
B
Discount rate
C
Federal funds rate
D
Prime rate
11) The interest rate that the Fed charges on loans to banks is called:
A
Open-market operations
B
Discount rate
C
Federal funds rate
D
Prime rate
12) The interest rate that banks charge each other on loans is called:
A
Open-market operations
B
Prime rate
C
Federal funds rate
D
Discount rate
13) If the Fed lowers the reserve requirement:
A
More money is available to loan
B
Less money is available to loan
C
Banks lose business
D
Fewer people get credit
14) To decrease the money supply, the Fed can:
A
Increase the reserve requirement
B
Decrease the reserve requirement
C
Buy more Treasury bills
D
Request permission from Congress
15) Which of the following might result if the Fed increases the discount rate?
A
Increase the prime rate
B
Increase in the total money supply
C
Banks make more loans available
D
Banks borrow more reserves
16) A high prime rate:
A
Discourages borrowing
B
Increases the money supply
C
Helps new businesses
D
Encourages borrowing
17) One problem in carrying out monetary policy is the:
A
Inability of the Fed to increase the money supply
B
Impossibility of controlling inflation
C
Fed’s receiving of conflicting advice from many directions
D
Inability of the Fed to decrease the money supply
18) The Fed can affect the money supply by:
A
Issuing monthly money supply targets
B
Announcing a new prime rate
C
Changing reserve requirements
D
Working with Congress
19) Which of the following is affected by decisions of the Federal Open Market Committee?
A
Interest rates
B
Check clearing
C
Check deposits
D
Minting coins
20) If the Federal Reserve adopts an expansionary monetary policy:
A
Interest rates fall and credit is abundant
B
Interest rates rise and credit is abundant
C
Interest rates rise and credit is tight
D
Interest rates rise and credit is abundant
*select an answer for all questions
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