Ch28 Monetary Policy and Bank Regulation

*Ch28 Monetary Policy and Bank Regulation*

*Multiple Choice Questions*

*1.* Which of the following institutions determines the quantity of money in the economy as its most important task?

A. U.S. Department of the Treasury
B. Federal Open Market Committee
C. Central Bank
D. Federal Reserve Board of Governors

Answer: C Reference:

Explanation:

Type: Multiple Choice

*2.* 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.

Answer: B Reference:

Explanation:

Type: Multiple Choice

*3.* 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

Answer: D Reference:

Explanation:

Type: Multiple Choice

*4.* Which of the following is a traditional tool used by the Fed during recessions?

A. quantitative easing
B. higher interest rates
C. open market operations
D. coins and paper currency

Answer: C Reference:

Explanation:

Type: Multiple Choice

*5.* Which of the following terms is used to describe the proportion of deposits that banks are legally required to deposit with the central bank?

A. discount requirements
B. deposit requirements
C. reserve requirements
D. monetary requirements

Answer: C Reference:

Explanation:

Type: Multiple Choice

*6.* 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

Answer: A Reference:

Explanation:

Type: Multiple Choice

*7.* Which of the following is considered to be a relatively weak tool of monetary policy?

A. quantitative easing
B. altering the discount rate
C. reserve requirements
D. reducing the money supply

Answer: B Reference:

Explanation:

Type: Multiple Choice

*8.* A central bank that wants to increase the quantity of money in the economy will:

A. raise the discount rate.
B. sell bonds in open market operations.
C. reverse quantitative easing.
D. buy bonds in open market operations.

Answer: D Reference:

Explanation:

Type: Multiple Choice

*9.* A central bank that desires to reduce the quantity of money in the economy can:

A. raise the reserve requirement.
B. buy bonds in open market operations.
C. lower the discount rate.
D. engage in quantitative easing.

Tags: