ECO 372 Week 3 Knowledge Check

Topics: Monetary policy, Federal Reserve System, Central bank Pages: 2 (276 words) Published: January 3, 2015
ECO/372 Week 3 Knowledge Check – Quiz
Quiz Questions with 100% Correct Answers:
1. If you expect interest rates to rise, you will want to be holding 2. The interest rate is the price paid for the use of a
3. Which of the following do policy makers tend to target when setting monetary policy? 4. If the Federal Reserve reduced its reserve requirement from 6.5 percent to 5 percent, this policy would most likely 5. If banks hold excess reserves whereas before they did not, the money multiplier 6. The process of money multiplier depends on

7. Quantitative easing refers to
8. If the Fed wants an easier monetary policy, it might
9. When the Fed raised the interest rates between 2004 and 2007, the Federal Reserve

Answers
If you expect interest rates to rise, you will want to be holding more money because prices will likely fall
The interest rate is the price paid for the use of a
financial asset
Which of the following do policy makers tend to target when setting monetary policy? Interest rates
If the Federal Reserve reduced its reserve requirement from 6.5 percent to 5 percent, this policy would most likely increase both the money multiplier and the money supply
If banks hold excess reserves whereas before they did not, the money multiplier will become smaller
The process of money multiplier depends on
the banks holding all the currency
Quantitative easing refers to
non-standard monetary policy design to extend credit in the economy If the Fed wants an easier monetary policy, it might
buy government securities to reduce the federal funds rate
When the Fed raised the interest rates between 2004 and 2007, the Federal Reserve sold U.S. government securities, thereby contracting funds to the federal funds market
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