name:____ per:____ day 7 - monetary policy & the federal reserve the fed provides services to other banks…

name:____ per:____ day 7 - monetary policy & the federal reserve the fed provides services to other banks, the u.s. government, and foreign banks exit ticket - monetary policy contractionary (tight) policy - during \peak times\ expansionary (loose) policy - during \low times\ the \fed\ video recap: https://wetheeconomy.com/films/fed - head/?autoplay=yes task: determine if the following situations would require loose (easy) monetary policy or tight monetary policy from the federal reserve. #1. the cpi reports an increase of inflation by 5.3%. #2. the us economy has begun to decline marked by a drastic increase in the unemployment rate. #3. the us economy is in the middle of a long drawn out recession. #4. the unemployment rate has fallen dramatically below the recommended 3 - 5% and there is unprecedented success in the us economy. #5. the national unemployment rate has just hit an all time high of 7.3%. #6. which governmental body is responsible for carrying out monetary policies (interest rates, money supply) in the united states? a. the us congress b. secretary of the treasury c. the president d. the federal reserve #7. what action might the federal reserve make if the economy is in a contractionary period? a. decrease taxes b. decrease the interest rates c. sell government bonds d. increase the interest rates #8. how might the federal reserve respond to an expansionary period? a. by lowering income taxes b. by raising the reserve requirement c. by raising income taxes d. by lowering the reserve requirement #9. which of the following would not be an appropriate response to an expanding economy? a. increasing interest rates b. making government bonds available c. raising reserve ratios d. lowering interest rates #10. what does federal monetary policy promote? a. economic stability b. economic growth c. economic slowdown d. lower taxes and spending

name:____ per:____ day 7 - monetary policy & the federal reserve the fed provides services to other banks, the u.s. government, and foreign banks exit ticket - monetary policy contractionary (tight) policy - during \peak times\ expansionary (loose) policy - during \low times\ the \fed\ video recap: https://wetheeconomy.com/films/fed - head/?autoplay=yes task: determine if the following situations would require loose (easy) monetary policy or tight monetary policy from the federal reserve. #1. the cpi reports an increase of inflation by 5.3%. #2. the us economy has begun to decline marked by a drastic increase in the unemployment rate. #3. the us economy is in the middle of a long drawn out recession. #4. the unemployment rate has fallen dramatically below the recommended 3 - 5% and there is unprecedented success in the us economy. #5. the national unemployment rate has just hit an all time high of 7.3%. #6. which governmental body is responsible for carrying out monetary policies (interest rates, money supply) in the united states? a. the us congress b. secretary of the treasury c. the president d. the federal reserve #7. what action might the federal reserve make if the economy is in a contractionary period? a. decrease taxes b. decrease the interest rates c. sell government bonds d. increase the interest rates #8. how might the federal reserve respond to an expansionary period? a. by lowering income taxes b. by raising the reserve requirement c. by raising income taxes d. by lowering the reserve requirement #9. which of the following would not be an appropriate response to an expanding economy? a. increasing interest rates b. making government bonds available c. raising reserve ratios d. lowering interest rates #10. what does federal monetary policy promote? a. economic stability b. economic growth c. economic slowdown d. lower taxes and spending

Answer

Brief Explanations:

  1. High inflation (5.3% increase in CPI) requires tight monetary policy to reduce the money - supply and control inflation.
  2. A declining economy with rising unemployment needs loose monetary policy to stimulate economic growth and create jobs.
  3. In a recession, loose monetary policy is used to boost the economy.
  4. With very low unemployment and strong economic success, tight monetary policy may be needed to prevent over - heating.
  5. High unemployment rate calls for loose monetary policy to stimulate economic activity.
  6. The Federal Reserve is responsible for monetary policy in the US.
  7. In a contractionary period, the Fed may decrease interest rates to stimulate borrowing and spending.
  8. In an expansionary period, the Fed may raise the reserve requirement to reduce the money supply.
  9. Lowering interest rates is not an appropriate response to an expanding economy as it would further increase the money supply.
  10. Federal monetary policy aims to promote economic stability.

Answer:

  1. Tight monetary policy
  2. Loose monetary policy
  3. Loose monetary policy
  4. Tight monetary policy
  5. Loose monetary policy
  6. D. The Federal Reserve
  7. B. decrease the interest rates
  8. B. by raising the reserve requirement
  9. D. lowering interest rates
  10. A. economic stability