Role of Banks Quiz

What is the primary role of banks in the U.S. monetary system?

• To regulate the stock market

• To set tax rates

• To act as intermediaries between savers and borrowers

• To print money

What is the Federal Reserve System responsible for?

• Implementing monetary policy

• Managing international trade agreements

• Setting global interest rates

• Implementing fiscal policy

What does M1 money supply include?

• Stocks and bonds

• Cash, checkable deposits, and traveler's checks

• Certificates of deposit and money market funds

• Savings accounts and time deposits

Which of the following is NOT part of M2 money supply?

• Savings accounts

• Time deposits

• Traveler's checks

• Money market funds

What is the main function of the Federal Reserve?

• To oversee international trade

• To conduct monetary policy

• To manage the national budget

• To regulate the stock market

What is the purpose of the Federal Reserve's open market operations?

• To control inflation

• To influence the quantity of bank reserves and interest rates

• To set tax policies

• To regulate international trade

What is the federal funds rate?

• The interest rate for long-term loans

• The interest rate charged by banks for overnight loans to other banks

• The interest rate set by the government for savings accounts

• The interest rate for international loans

What is the role of the Federal Open Market Committee (FOMC)?

• To set tax rates

• To make decisions regarding open market operations

• To manage the national budget

• To regulate international trade

What happens when the central bank buys bonds?

• The money supply decreases

• The money supply increases

• Interest rates rise

• Inflation decreases

What is the effect of raising the reserve requirement?

• Banks have more money to lend

• Banks have less money to lend

• Interest rates decrease

• Inflation increases