Monetary Policy Practice EOCT Questions

Which component of the Federal Reserve System holds the most power in regards to day to day monetary policy? A      The Board of governors B       Congress and the President C      The 12 District banks D      The Federal Open Market Committee

2. Monetary policy is defined as the A      taxing and spending decisions of the United States Government. B       buying and selling of currency in foreign exchange markets. C      interaction of buyers and sellers in the market place. D      decisions of the Federal Reserve System that determine the money supply.

3. The actions of the FED that control and regulate the amount of money in the economy are referred to as A      fiscal policy. B       monetary policy. C      international trade. D      opportunity costs.

4. Which is the Fed MOST likely to do in the event of a recession? A      Buy treasury bonds on the open market. B       Sell treasury bonds on the open market. C      Raise the discount rate. D      Raise the reserve requirement.

5. When the Fed is conducting open market operations, they are buying or selling A      stocks on the New York Stock Exchange. B       goods in the product market. C      factors in the factor market. D      government bonds.

6. If the economy was in a recession and Congress and the Federal Reserve Bank BOTH wanted to correct it quickly, which policy combination would be best? A raise taxes, buy treasury bonds B cut taxes, sell treasury bonds C increase government spending, sell treasury bonds D cut taxes, buy treasury bonds

7. A government decision to increase taxes is MOST related to which combination of events? Consumption        AggregateDemand            GDP Adecrease                       decrease                      decrease Bdecrease                       increase                       decrease C  increase                        increase                       increase D decrease                       decrease                      increase

Key D B A