QUESTION 1
The Fed has the most control over
A. money market mutual funds.
B. the monetary base.
C. M2.
D. M1.
QUESTION 2
When banks borrow directly from the Fed, the interest rate on those loans is the
A. prime rate.
B. Federal Funds rate.
C. required reserve rate.
D. discount rate.
QUESTION 3
Moral hazard occurs when
A. financial institutions become insolvent because they issued too many loans.
B. there are more short-term liabilities than short-term assets.
C. financial institutions take on too much risk because they are insured.
D. the failure of one financial institution can bring down other institutions as well.
QUESTION 4
An increase in money growth will cause inflation to increase in
A. neither the short run nor the long run.
B. the short run only.
C. both the short run and the long run.
D. the long run only.
QUESTION 5
What is the purpose of the Fed's structure?
A. to make sure all states are given equal access to monetary policy decisions
B. to keep the power of the Fed dispersed
C. to keep the private sector out of the monetary policy making arena
D. to give the President of the United States as many tools as possible to regulate the economy