Quiz on Monetary Policy and the Federal Reserve

Who guides the operation of the Federal Reserve System?

• The President of the United States

• The Board of Governors

• The U.S. Congress

• The Supreme Court

Who selects the Fed chair?

• The President of the United States with Senate confirmation

• The Federal Reserve Board

• The General Accountability Office

• The Federal Open Market Committee

What is the Fed's long run inflation target?

• 0%

• 1%

• 2%

• 3%

If nominal wages do not change and the inflation rate is 2 percent, then

• the unemployment rate rises by 2 percent.

• real wages are effectively cut by 2 percent.

• the unemployment rate falls by 2 percent.

• real wages rise by 2 percent.

What does the Fed target when trying to influence the real interest rate?

• The federal funds rate

• The money supply

• The unemployment rate

• The GDP growth rate

If the Federal Open Market Committee wants to lower excessive inflation, then it will raise the

• A) interest on reserve balances.

• B) the resistance ratio.

• C) minimum efficient scale.

• D) Phillips curve.

If the FOMC wants to lower excessive unemployment, then it is likely to announce

• A) a higher interest on reserve balances.

• B) a lower growth rate for the M1 money supply.

• C) a lower target range for the federal funds rate.

• D) a higher ON RRP rate.

Which of the following acts a floor for the federal funds rate?

• the required reserve ratio

• the discount rate

• interest on reserve balances

• the growth rate of real GDP

Everything else constant, if interest rates in the U.S. rise, then the value of the U.S. dollars tends to

• fluctuate in an unpredictable manner.

• remain unchanged.

• appreciate (i.e., rise).

• depreciate (i.e., fall).

Which of the following acts as a ceiling for the federal funds rate?

• the discount rate

• the rate of inflation

• the required reserve ratio

• interest on reserves