Chapter 28 Quiz Monetary Policy and Bank Regulation

What term is used to describe the interest rate charged by the central bank when it makes loans to commercial banks? A.) discount rate B.) reserve requirement C.) Fed rate D.) open market rate

A.) discount rate

When a Central Bank makes a decision that will cause an increase in both the money supply and aggregate demand, it is: A.) following a loose monetary policy. B.) following a tight monetary policy. C.) following a contractionary monetary policy. D.) revising quantitative easing.

A.) following a loose monetary policy.

The _______________________ is the institution designed to control the quantity of money in the economy and also to oversee the: A.) FOMC; passing of tax and spending bills. B.) Central Bank; safety and stability of the banking system. C.) FFIEC; day-to-day democratic control of policy. D.) FDIC; responsibility for deposit insurance.

B.) Central Bank; safety and stability of the banking system.

Which of the following events would cause interest rates to increase? A.) lower tax rates B.) a higher discount rate C.) lower reserve requirements D.) an open market operation to buy bonds

B.) a higher discount rate

How are the specific interest rates for the lending and borrowing markets determined? A.) U.S. Treasure Department Board policy B.) by the forces of supply and demand C.) through open market operations D.) by altering the discount rate

B.) by the forces of supply and demand

If nominal GDP is 1800 and the money supply is 450, then what is velocity of circulation? A.) 25 B.) 4.5 C.) 4 D.) 22

C.) 4

What is the name given to the macroeconomic equation MV = PQ? A.) basic velocity of money equation B.) basic quantity equation of output C.) basic quantity equation of money D.) basic velocity of price equation

C.) basic quantity equation of money

When the central bank decides it will sell bonds using open market operations: A.) interest rates decrease. B.) the money supply increases. C.) the money supply decreases. D.) the money supply is unaffected.

C.) the money supply decreases.

Which of the following institutions oversees the safety and stability of the U.S. banking system? A.) Office of the Comptroller of the Currency B.) Federal Financial Institutions Examination Council C.) Federal Open Market Committee D.) The Federal Reserve

D.) The Federal Reserve

The Central Bank has raised its reserve requirement from 10% to 12%. If Southern Bank finds that it is not holding enough in reserves to meet the higher requirements, then it will likely: A.) keep track of whether money is flowing in or out of the bank. B.) buy bonds to increase the size of its reserve assets. C.) reduce the quantity of money and loans on the balance sheet. D.) borrow for the short term from the central bank.

D.) borrow for the short term from the central bank.