#1
Which of the following is a tool used by the Federal Reserve for implementing monetary policy?
Open Market Operations
ExplanationBuying or selling government securities to control the money supply and interest rates.
#2
What is the primary goal of monetary policy?
All of the above
ExplanationStabilizing inflation, maximizing employment, and moderating long-term interest rates.
#3
Who is responsible for setting monetary policy in the United States?
Federal Reserve
ExplanationThe central bank of the United States.
#4
What is the federal funds rate?
The interest rate at which banks lend to each other overnight
ExplanationKey benchmark rate used in financial markets.
#5
What is the purpose of conducting open market operations?
To control the money supply and interest rates
ExplanationRegulating liquidity in the economy by buying or selling securities.
#6
Which of the following is a contractionary monetary policy measure?
Selling government securities
ExplanationReducing the money supply to curb inflation.
#7
What is the purpose of the discount rate set by the Federal Reserve?
To encourage or discourage banks from borrowing directly from the Fed
ExplanationInfluencing banks' borrowing behavior and overall money supply.
#8
What are the tools of monetary policy used by the Federal Reserve?
Open market operations, reserve requirements, and discount rate
ExplanationMethods for influencing the economy's money supply and interest rates.
#9
What is the purpose of the Federal Reserve's dual mandate?
To stabilize inflation and unemployment
ExplanationMaintaining price stability and maximum sustainable employment.
#10
What is the term used to describe the situation when the Federal Reserve buys government securities from banks?
Expansionary monetary policy
ExplanationIncreasing the money supply to stimulate economic growth.
#11
What is the relationship between interest rates and investment when monetary policy is expansionary?
Interest rates decrease, and investment increases
ExplanationLowering borrowing costs to encourage spending and investment.
#12
Which of the following is an example of an expansionary monetary policy tool?
Lowering the federal funds rate
ExplanationReducing the cost of borrowing to stimulate economic activity.