Economics -- Chapter Ten

1. Federal Reserve independence is

Completely fictitious

Totally complete

Subject to Congress's desire to keep it independent

Subject to the Supreme Court's desire to keep in independent

2. The Constitution of the United States grants to Congress the power of monetary policy in Article 1, Section 8. Since 1913, Congress has

Jealousy guarded this power

Granted this power the the president

Delegated this power to the Federal Reserve

Ignored this power

3. When engaging in monetary policy, the impact of expansionary policy on a aggregate demand aggregate supply model is to

Increase aggregate demand

Increase aggregate supply

Decrease aggregate demand

Decrease aggregate supply

4. The "creation" of money is

Entirely the purview of Congress

Entirely the purview of the Federal Reserve

Entirely subject to the whims of the banking system

5. Which of the following tools would have likely had the impact of raising short-term interest rates the most?

Cutting the federal funds target by one-quarter point

Buying $1-millions in bonds

Raising the reserve requirement from 8 percent to 15 percent

Raising personal income taxes rates by 1 percent-age point each

6. The ability of the Federal Reserve to control interest rates is

Limited almost entirely to short-term rates

Limited almost entirely to long-term rates

Limited almost entirely to intermediate-term rates

Unlimited

7. The most precise tool of monetary poolicy is

The adjustment of the federal target

The adjustment of the discount rate

The adjustment of the reserve requirement

The use of open-market operations

8. During 1999 through 2006 the Federal Reserve

Was passive and simply let things happen

Reacted actively to quell potentially inflationary expansions but did nothing to deal with the recession

Reacted actively to deal with the recession but did nothing to quell potentially inflationary expansions

Reacted actively to deal with the recession and to quell potentially inflationary expansions