Question

If the Federal Reserve did not regulate monetary policy, monitor banks and provide services for banks, what would most likely be the economic conditions to transact business in the U.S.?

Select one

: a. There would be no discrimination in lending by local banks.

b. The economy would primarily be based on a barter system rather than a fiat system.

c. The economy would be less efficient and transactions most likely more costly.

d. Banking activities would be less risky.
In order to ________ the money supply, the federal reserve should ________ bonds in open market operations.

Select one:

a. increase; issue

b. increase; buy

c. increase; sell

d. decrease; buy

Moral hazard is associated with which of the following Federal Reserve bank functions?
Select one:

a. Open market operations

b. FDIC.
c. Lender of last resort
d. reserve requirements.
Quantitative easing can be described as a means of
Select one:
a. easing banks debt.
b. encouraging consumption among private households.
c. improving credit conditions for private firms and encouraging them to commit to capital expansion projects.

d. improving credit conditions for government agencies to encourage them to maintain income maintenance programs.

Quantitative easing undertaken after 2008 is different from traditional central bank intervention in that it focused on

Select one:

a. increasing short term investments.

b. purchasing “toxic assets” and restoring credit to the private sector.

c. raising private bank’s revenues and therefore encouraging investment.

d. purchasing long-term government securities to encourage long-term capital projects and ease mortgage conditions.

The Federal Reserve’s monetary policy tools include all the following EXCEPT

Select one:
a. setting reserve requirements.

b. varying the discount rate.

c. printing money.

d. conducting open market operations.

Answer 1

1. [C] The economy would be less efficient and transactions most likely more costly.

2. [B] increase, buy.

In order to __increase ___ the money supply, the federal reserve should ___buy___ bonds in open market operations.

3. [C] Lender of Last Resort

4. - [B] encouraging consumption among private households.

5. d. purchasing long-term government securities to encourage long-term capital projects and ease mortgage conditions

6. [C] Printing Money

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