Econ- Chapter 15 Question Preview (ID: 60299)


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Which of the following might result if the Fed increases the discount rate?
a) Increase in the total money supply
b) Banks borrow more reserves
c) Banks make more loans available
d) Increase the prime rate

The interest rate that banks charge each other on loans is called:
a) Discount rate
b) Prime rate
c) Federal funds rate
d) Open-market operations

If the Fed lowers the reserve requirement:
a) Less money is available to loan
b) More money is available to loan
c) Banks lose business
d) Fewer people get credit

To decrease the money supply, the Fed can:
a) Decrease the reserve requirement
b) Buy more Treasury bills
c) Increase the reserve requirement
d) Request permission from Congress

Why would a country want a tight monetary policy?
a) Decrease the value of the dollar
b) Control inflation
c) Encourage economic growth
d) Increase consumer spending

Fractional reserve banking makes it possible for banks to:
a) Keep all deposits in reserve
b) Keep no cash in their vaults
c) Use some deposits to make loans
d) Process checks

The buying and selling of U.S. securities by the Fed to affect the money supply is called:
a) Discount rate
b) Prime rate
c) Federal Funds rate
d) Open-market operations

The rate of interest that banks charge on loans to their best business customers is called:
a) Discount rate
b) Prime rate
c) Federal funds rate
d) Open-market operations

The interest rate that the Fed charges on loans to banks is called:
a) Discount rate
b) Prime rate
c) Federal funds rate
d) Open-market operations

Which of the following is a result of a tight monetary policy?
a) People are willing to borrow money
b) Businesses expand
c) Consumers buy new homes
d) Businesses postpone expansion

Monetary policy that makes credit inexpensive and abundant is called:
a) Loose
b) Tight
c) Light
d) Right

A system in which only a fraction of the deposits in a bank is kept on hand is called:
a) Reserve requirements
b) Fractional reserve banking
c) Monetary policy
d) Fractional deposits

Which of the following is a result of a loose monetary policy?
a) People are willing to borrow money
b) People are unwilling to borrow money
c) Consumers hesitate to buy new homes
d) Businesses postpone expansion

Regulation set by the Fed requiring banks to keep a certain percentage of their deposits in cash is called:
a) Deposit requirements
b) Check clearing
c) Check deposits
d) Reserve requirements

Monetary policy that makes credit expensive and in short supply is called:
a) Loose monetary policy
b) Tight monetary policy
c) Light monetary policy
d) Right monetary policy

The Fed can affect the money supply by:
a) Announcing a new prime rate
b) Changing reserve requirements
c) Issuing monthly money supply targets
d) Working with Congress

A high prime rate:
a) Discourages borrowing
b) Encourages borrowing
c) Increases the money supply
d) Helps new businesses

One problem in carrying out monetary policy is the:
a) Inability of the Fed to decrease the money supply
b) Impossibility of controlling inflation
c) Inability of the Fed to increase the money supply
d) Fed’s receiving of conflicting advice from many directions

Which of the following is affected by decisions of the Federal Open Market Committee?
a) Check clearing
b) Interest rates
c) Minting coins
d) Check deposits

If the Federal Reserve adopts an expansionary monetary policy:
a) Interest rates rise and credit is tight
b) Interest rates rise and credit is abundant
c) Interest rates rise and credit is abundant
d) Interest rates fall and credit is abundant

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