Economics

38 Questions  I  By Lillsar95
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Economics Quizzes & Trivia
Monetary Policy

  
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Questions and Answers

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  • 1. 
    How is money created in our economy?
    • A. 

      Printing press

    • B. 

      Banks giving out loans

    • C. 

      The Fed buying bonds

    • D. 

      China providing dollars


  • 2. 
    What term is used to rescribe the money that the banks must keep from every deposit?
    • A. 

      Excess reserves

    • B. 

      Money multiplier

    • C. 

      Required reserves

    • D. 

      Deposit


  • 3. 
    What is Required Reserve?
    • A. 

      The amount of a deposit the bank may loan out. They CAN give the money out.

    • B. 

      The amount of a deposit the bank must keep in its vault. They may not loan this money out.


  • 4. 
    What is Excess Reserve?
    • A. 

      The amount of a deposit the bank may loan out. They CAN give the money out.

    • B. 

      The amount of a deposit the bank must keep in its vault. They may not loan this money out.


  • 5. 
    How do we calculate the money multiplier?
    • A. 

      1 / Reserve Requirement

    • B. 

      Excess reserves / required reserves

    • C. 

      Required reserves / reserve requirement

    • D. 

      1 / excess reserves


  • 6. 
    Initial Deposit = $100 Reserve Requirement = 10% What is the money multiplier?
    • A. 

      1

    • B. 

      10

    • C. 

      100

    • D. 

      10%


  • 7. 
    Initial Deposit = $100 Reserve Requirement = 10% What is the amount of excess reserves?
    • A. 

      $10

    • B. 

      $100

    • C. 

      $90

    • D. 

      $9


  • 8. 
    Initial Deposit = $100 Reserve Requirement = 10% How much money will be created from this initial deposite?
    • A. 

      $990

    • B. 

      $1000

    • C. 

      $9000

    • D. 

      $900


  • 9. 
    The equation for the excess reserve is:
    • A. 

      2 x Reserve requirement

    • B. 

      Total deposit - required reserve

    • C. 

      1 / total deposit


  • 10. 
    The equation for finding out the total amount of money created is:
    • A. 

      Multiplier x excess reserve

    • B. 

      Required reserve / 10%

    • C. 

      .1 / multiplier


  • 11. 
    Which of these is not an option the Federal Reserve has to control the economy?
    • A. 

      Discount rate

    • B. 

      Reserve requirement

    • C. 

      Stock options

    • D. 

      Open market operations


  • 12. 
    What happens to the money supply when the Fed sells government securities?
    • A. 

      Increases

    • B. 

      Decreases

    • C. 

      Same


  • 13. 
    What happens to the money supply when the Fed lowers the reserve reqirements?
    • A. 

      Increases

    • B. 

      Decreases

    • C. 

      Same


  • 14. 
    What happens to the money supply when the Fed raises the discount rate?
    • A. 

      Increases

    • B. 

      Decreases

    • C. 

      Same


  • 15. 
    When would the Fed decide to increase the money supply?
    • A. 

      Recession

    • B. 

      Inflation

    • C. 

      Normal Economy


  • 16. 
    When would the Fed decide to increase the interest rates?
    • A. 

      Downturn

    • B. 

      Normal Economy

    • C. 

      Hot Economy

    • D. 

      Never


  • 17. 
    Unemployment: 6.2% GDP Growth: -0.3% Inflation: 1.7% What is the major problem confronting this economy?
    • A. 

      Recession

    • B. 

      Inflation


  • 18. 
    Unemployment: 6.2% GDP Growth: -0.3% Inflation: 1.7% What type of monetary policy is needed?
    • A. 

      Easy Money

    • B. 

      Tight Money


  • 19. 
    Unemployment: 6.2% GDP Growth: -0.3% Inflation: 1.7% What effect will your change in the money supply have on interest rates?
    • A. 

      Higher

    • B. 

      Lower

    • C. 

      No effect


  • 20. 
    What is Lag Time?
    • A. 

      The time it takes for a policy change to take effect

    • B. 

      The desired results happening too quickly

    • C. 

      Out of date Fed technology

    • D. 

      Not knowing accurate data


  • 21. 
    Easy money =
    • A. 

      High reserve requirement

    • B. 

      High Discount rate

    • C. 

      Low Reserve Requirement

    • D. 

      Low Discount Rate

    • E. 

      Sell Bonds

    • F. 

      Buy Bonds


  • 22. 
    Tight money =
    • A. 

      High reserve requirement

    • B. 

      High Discount rate

    • C. 

      Low Reserve Requirement

    • D. 

      Low Discount Rate

    • E. 

      Sell Bonds

    • F. 

      Buy Bonds


  • 23. 
    Unemployment: 6.2% GDP Growth: -0.3% Inflation: 1.7% What combination of actions by the Fed would achieve all the desired effects? (HINT: easy money = ____)
    • A. 

      Raise Discount Rate, Lower reserve requirement, sell bonds

    • B. 

      Raise discount rate, raise reserve requirement, sell bonds

    • C. 

      Lower discount rate, lower reserve requirement, buy bonds

    • D. 

      Lower discount rate, raise reserve requirement, sell bonds


  • 24. 
    The Fed senses that people are not saving enough.
    • A. 

      Easy Money

    • B. 

      Tight Money

    • C. 

      Moral Persuasion


  • 25. 
    GDP has dipped from 3% to 1% in the last year.
    • A. 

      Easy Money

    • B. 

      Tight Money

    • C. 

      Moral Persuasion


  • 26. 
    The USA is experiencing both high inflation and high unemployment.
    • A. 

      Easy Money

    • B. 

      Tight Money

    • C. 

      Moral Persuasion


  • 27. 
    The consumer price index is up and housing starts are at a 15 year high.
    • A. 

      Easy Money

    • B. 

      Tight Money

    • C. 

      Moral Persuasion


  • 28. 
    Unemployment is at 11% and inflation is at 2%.
    • A. 

      Easy Money

    • B. 

      Tight Money

    • C. 

      Moral Persuasion


  • 29. 
    Prices are stable, and the GDP is growing at a 3% rate.
    • A. 

      Easy Money

    • B. 

      Tight Money

    • C. 

      Moral Persuasion


  • 30. 
    Which person is the current federal reserve chairman?
    • A. 

      Alan Greenspan

    • B. 

      Henry Paulson

    • C. 

      Paul Volcker

    • D. 

      Ben Bernanke


  • 31. 
    What is the name of the 7 people who are at the top of the federal reserve structure?
    • A. 

      District bank presidents

    • B. 

      Board of governors

    • C. 

      American people

    • D. 

      Federal open market committee


  • 32. 
    Which portion of the fed actually gets to decide on monetary policy?
    • A. 

      District bank presidents

    • B. 

      Board of governors

    • C. 

      American people

    • D. 

      Federal open market committee


  • 33. 
    How long do the board of gonvernors serve for?
    • A. 

      1 year

    • B. 

      4 years

    • C. 

      10 years

    • D. 

      14 years


  • 34. 
    How long is the term of the fed chairman?
    • A. 

      1 year

    • B. 

      4 years

    • C. 

      10 years

    • D. 

      14 years


  • 35. 
    Which district bank president is allowed to always serve on the FOMC and never has to rotate?
    • A. 

      Washington DC

    • B. 

      Chicago

    • C. 

      New York

    • D. 

      San Francisco


  • 36. 
    Who appoints the fed chairman?
    • A. 

      Treasury secretary

    • B. 

      Secretary of state

    • C. 

      President

    • D. 

      Board of governors


  • 37. 
    Which of these is not one of the functions of money?
    • A. 

      Medium of exchange

    • B. 

      Store of value

    • C. 

      Measure of value

    • D. 

      All are functions


  • 38. 
    What type of money is used in the USA today?
    • A. 

      Specie

    • B. 

      Fiat

    • C. 

      Gold-backed

    • D. 

      Silver-backed


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