Question

write m for monetary policy or f for fiscal policy.
5.1) ______ controlling supply of money
5.2) ______ changing the discount rate that the federal reserve charges for money borrowed by member banks
5.3) ______ creating a demand for goods and services
5.4) ______ raising taxes to slow the economy down
5.5) ______ basing the economy on surplus or deficit spending
5.6) ______ lowering the reserve ratio to encourage more lending of money
5.7) ______ spending more than the government takes in
choose the best answers.
5.8) ____ the __ is the u.s. government’s central bank that oversees the country’s money supply.
a. third national bank c. bank of d.c.
b. federal reserve d. department of the treasury
5.9) ______ if the federal reserve board increases the discount rate, what effect will the higher discount rate have on the economy?
a. it will slow down the economy by making it more expensive to borrow money.
b. it will encourage more borrowing, thus stimulating the economy.
c. it will stimulate the economy by reducing the number of loans people can get.
d. it will slow down the economy by increasing the amount of money in circulation.
5.10) select three reasons why a state - chartered bank would want to be a member of the federal reserve system.
□ the fed offers lower interest rates on borrowed money to member banks.
□ the fed collects insufficient - fund checks for member banks.
□ the fed clears checks for the member banks.
□ the fed supplies money to member banks.
□ the fed borrows money for the national government.
□ the fed handles individual account transactions.

Explanation:

5.1-5.7:

• Monetary policy (M) involves central bank actions to manage money supply and interest rates.
• Fiscal policy (F) involves government tax and spending decisions.

5.8:

The U.S. central bank overseeing money supply is the Federal Reserve.

5.9:

A higher discount rate makes borrowing costlier for banks, reducing lending and slowing the economy.

5.10:

Member banks gain access to lower Fed borrowing rates, check clearing services, and Fed money supply support.

Answer:

5.1) M controlling supply of money
5.2) M changing the discount rate that the Federal Reserve charges for money borrowed by member banks
5.3) F creating a demand for goods and services
5.4) F raising taxes to slow the economy down
5.5) F basing the economy on surplus or deficit spending
5.6) M lowering the reserve ratio to encourage more lending of money
5.7) F spending more than the government takes in
5.8) B. Federal Reserve
5.9) A. It will slow down the economy by making it more expensive to borrow money.
5.10)

• The Fed offers lower interest rates on borrowed money to member banks.
• The Fed clears checks for the member banks.
• The Fed supplies money to member banks.