Monetary Policy Quiz

1. The Federal Reserve uses monetary policy to control inflation and stabilize the economy.

2. Raising interest rates increases borrowing and spending.

3. Expansionary monetary policy is typically used during a recession.

4. The Federal Funds Rate is the interest rate at which banks lend to each other overnight.

5. Contractionary monetary policy aims to reduce inflation by lowering interest rates.

6. Increasing the money supply leads to higher interest rates.

7. The Federal Reserve's dual mandate is to achieve maximum employment and stable prices.

8. Quantitative easing involves the central bank buying long-term securities to increase liquidity.

9. Lowering the discount rate makes it cheaper for banks to borrow money from the Federal Reserve.

10. Tight monetary policy leads to higher inflation and economic growth.