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Federal Reserve Bank of Boston Economic Quiz

Alan Greenspan for a Day 1) As Chairman of the Board of Governors of the Federal Reserve System, one of your primary concerns is influencing the rate of inflation. The rate of inflation is best described as: A persistent increase in the ... prime interest rate overall level of prices money supply demand for bank loans 2) As Chairman, you should be most concerned about which one of the following circumstances leading to rapid inflation? Low unemployment High unemployment High immigration Low government spending 3) You worry that the rate of inflation in the economy is increasing too quickly. In order to lower the rate of inflation, the Federal Reserve must decrease the rate of growth of bank reserves (or, more technically, the monetary base). Which of the following policy actions would you suggest to decrease the rate of growth of bank reserves? Raise mortgage rates Sell a few thousand shares of Microsoft Buy government securities Sell government securities 4) You have decreased the rate of growth of bank reserves to slow inflation. Which of the following effects on interest rates would you expect your decision to have? Interest rates will go up. Interest rates will go down. There will be no effect on interest rates. The Federal Reserve directly sets interest rates. Created with QuizScript

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Economic quiz written by: Kristina Johnson - September 2003 Views expressed in the economic quiz are those of the individual author.