Unit 6 Review: Monetary & Fiscal Policy

Front

What is the primary purpose of the Federal Reserve?

Back

Controlling inflation

Front

Which of the following is not a responsibility of the Federal Reserve? Setting interest rates, Supervising financial institutions, Collecting federal taxes, Maintaining financial stability

Back

Collecting federal taxes

Front

What are the two primary objectives of the Federal Reserve's dual mandate?

Back

Ensuring maximum employment and price stability

Front

How does the Federal Reserve aim to achieve its dual mandate?

Back

By adjusting the money supply

Front

What is the likely impact on the money supply if the Federal Reserve decides to increase both the Reserve Requirement and the Discount Rate?

Back

Decrease

Front

What is one method the Federal Reserve uses to control inflation? Options: Increasing the money supply, Lowering taxes, Adjusting the federal funds rate, Subsidizing exports

Back

Adjusting the federal funds rate

Front

What is the federal funds rate?

Back

The interest rate banks charge each other for loans.

Front

Abigail is studying different monetary policies in her economics class. She learns that one of the policies aims to stimulate economic growth by making borrowing cheaper. Which of the following is an example of this expansionary monetary policy? Increasing reserve requirements, Selling government securities (bonds), Decreasing the federal funds rate, Raising taxes

Back

Decreasing the federal funds rate

Front

What effect does a contractionary monetary policy have on the economy?

Back

Slows down economic growth

Front

What mechanism does the Federal Reserve use to influence the Federal Funds rate?

Back

The Federal Reserve adjusts the interest rates that act as price floors & price ceilings to guide the FFR