Understanding Cryptocurrencies and the Federal Reserve

What is a key feature of cryptocurrencies that makes them appealing?

• They are only used in the United States.

• They can be transferred electronically and securely.

• They are controlled by a central bank.

• They are backed by gold.

Why might cryptocurrencies like Bitcoin be less effective as a medium of exchange?

• They are only used for illegal activities.

• Their value fluctuates too much.

• They are too stable in value.

• They are not recognized by any government.

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

• To regulate cryptocurrency exchanges.

• To print new currency.

• To decide on changes to the money supply.

• To set tax rates.

Which tool does the Federal Reserve primarily use to manage the money supply?

• Regulating stock markets.

• Setting tax rates.

• Issuing new currency.

• Open market operations.

How does lowering the discount rate affect the economy?

• It reduces the amount of money in circulation.

• It makes borrowing more expensive for banks.

• It increases the required reserve ratio.

• It makes it easier for banks to borrow money.

What happens when the Federal Reserve lowers the required reserve ratio?

• Banks must hold more reserves.

• Banks can lend more money.

• Interest rates automatically rise.

• The money supply decreases.

What was a significant change in the Federal Reserve's operations after the 2008 financial crisis?

• The increase in excess reserves held by banks.

• The reduction of all interest rates to zero.

• The elimination of the FOMC.

• The introduction of a new currency.

What is one challenge the Federal Reserve faces in a world of ample reserves?

• Lack of government support.

• Excessive regulation of cryptocurrencies.

• Difficulty in influencing banks' lending behavior.

• Inability to print money.

How have digital currencies impacted the future of money?

• They are only used for illegal transactions.

• They are expected to be a component of money in the future.

• They have no impact on the economy.

• They have replaced all paper currencies.

What role do banks play in the economy according to the video?

• They print new money.

• They act as intermediaries between savers and borrowers.

• They set national interest rates.

• They regulate all financial markets.