Chapter 15 Monetary Policy

Chapter 15: Monetary Policy v.B AP Economics Fall 2010

Student: ________________________________________ Mr Daileda

1. The Federal funds rate is the interest rate that _______ charge(s) _______. 

A. the Fed; commercial banks.

B. banks; on federal student loans.

C. banks; other banks.

D. banks; their best corporate customers.

2. Monetary policy is expected to have its greatest impact on: 

A. Ig.

B. C.

C. G.

D. Xg. 

3. The problem of cyclical asymmetry refers to the idea that: 

A. the monetary authorities have been less willing to use an expansionary monetary policy than they have a restrictive monetary policy.

B. an expansionary monetary policy can force an expansion of the money supply, but a restrictive monetary policy may not achieve a contraction of the money supply.

C. cyclical downswings are typically of longer duration than cyclical upswings.

D. a restrictive monetary policy can force a contraction of the money supply, but an expansionary monetary policy may not achieve an increase in the money supply.

4. If the Federal Reserve authorities were attempting to reduce demand-pull inflation, the proper policies would be to: 

A. sell government securities, raise reserve requirements, and lower the discount rate.

B. buy government securities, raise reserve requirements, and raise the discount rate.

C. sell government securities, raise reserve requirements, and raise the discount rate.

D. sell government securities, lower reserve requirements, and lower the discount rate. 

5. When a commercial bank borrows from a Federal Reserve Bank: 

A. it indicates that the commercial bank is unsound financially.

B. the supply of money automatically increases.

C. the commercial bank's lending ability is increased.

D. the commercial bank's reserves are reduced.

6. Assume the legal reserve ratio is 25 percent and the Fourth National Bank borrows $10,000 from the Federal Reserve Bank in its district. As a result: 

A. commercial bank reserves...