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AP Macroeconomics Monetary Policy and Bank Regulation — practice questions

Explore 82 free Monetary Policy and Bank Regulation questions in AP Macroeconomics Economics. Open each question or exercise to read its content, reference answers and available explanation.

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Monetary Policy and Bank Regulation questions and exercises with answers

Showing questions 1–30 of 82.

A policy that lowers interest rates and stimulates borrowing is called:Read the answer and worked solution →A policy that raises interest rates and reduces borrowing is called:Read the answer and worked solution →Since the early 1920s, the most common monetary policy tool in the US has been:Read the answer and worked solution →Depositors racing to a bank to withdraw their money is called a:Read the answer and worked solution →How many regional Federal Reserve banks are there?Read the answer and worked solution →The interest rate banks pay on loans from the Federal Reserve is called the:Read the answer and worked solution →When a central bank buys bonds, the money supply in circulation does what?Read the answer and worked solution →If banks are required to hold a greater amount in reserves, they have less money to:Read the answer and worked solution →Which interest rate is specifically targeted in open market operations?Read the answer and worked solution →Which two strategies has Congress put in place to protect against bank runs?Read the answer and worked solution →Deposit insurance makes sure depositors do not lose their money even if the bank:Read the answer and worked solution →Bank capital is the difference between a bank's assets and its:Read the answer and worked solution →The stated goal of macroeconomic policy is low inflation and low:Read the answer and worked solution →Bank regulation covers reserve requirements, capital requirements and restrictions on:Read the answer and worked solution →Before borrowing from the Federal Reserve to meet its required reserves, a bank is expected to:Read the answer and worked solution →One named pitfall of monetary policy is that it affects the economy only after:Read the answer and worked solution →If velocity changes unpredictably over time, what becomes unpredictable?Read the answer and worked solution →How many members sit on the Board of Governors of the Federal Reserve?Read the answer and worked solution →Loosen or tightenRead the answer and worked solution →More money or lessRead the answer and worked solution →Three jobs of the central bankRead the answer and worked solution →Spot the false statementRead the answer and worked solution →Monetary policy bingoRead the answer and worked solution →Over the broadest area and longest time in history, the item people used as money was the:Read the answer and worked solution →Economies without money typically rely on:Read the answer and worked solution →Money acting as an intermediary between buyer and seller serves as a:Read the answer and worked solution →Money as the ruler by which we measure values is its role as a:Read the answer and worked solution →Gold, silver and cowrie shells, which have value beyond their use as money, are:Read the answer and worked solution →Money with no intrinsic value that a government declares legal tender is:Read the answer and worked solution →How quickly a financial asset can be used to buy a good or service is its:Read the answer and worked solution →

Worked practice questions

A policy that lowers interest rates and stimulates borrowing is called:

  1. Expansionary
  2. Exclamatory
  3. Exploratory
  4. Explanatory
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Correct answer: A. Expansionary

1. Monetary policy can push in either of two directions. 2. Lower rates make borrowing cheaper and encourage spending. 3. A policy that lowers interest rates and stimulates borrowing is expansionary. 4. It also goes by the name loose monetary policy. _Source: OpenStax Principles of Macroeconomics 3e (CC BY 4.0), Ch 15 'Monetary Policy and Bank Regulation', sections 15.1-15.5_

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A policy that raises interest rates and reduces borrowing is called:

  1. Constitutional
  2. Contractionary
  3. Considerately
  4. Conversational
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Correct answer: B. Contractionary

1. Raising rates makes borrowing dearer and slows spending. 2. That is the opposite direction from the expansionary stance. 3. A policy that raises interest rates and reduces borrowing is contractionary. 4. It also goes by the name tight monetary policy. _Source: OpenStax Principles of Macroeconomics 3e (CC BY 4.0), Ch 15 'Monetary Policy and Bank Regulation', sections 15.1-15.5_

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Since the early 1920s, the most common monetary policy tool in the US has been:

  1. Open market operations
  2. Open market obligations
  3. Overseas market operations
  4. Ordinary market objections
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Correct answer: A. Open market operations

1. Several tools are available to a central bank. 2. One of them has dominated practice for a century. 3. The most common monetary policy tool has been open market operations. 4. They involve buying and selling government securities. _Source: OpenStax Principles of Macroeconomics 3e (CC BY 4.0), Ch 15 'Monetary Policy and Bank Regulation', sections 15.1-15.5_

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