Spot the false statement

Exercise and reference answers

Questions

1. False statement

   Expansionary policy raises interest rates

   Statements

   1. Expansionary policy raises interest rates
   2. Buying bonds increases the money supply
   3. Higher reserve requirements cut lending

2. False statement

   The Board of Governors has seventy members

   Statements

   1. There are twelve regional Federal Reserve banks
   2. The Board of Governors has seventy members
   3. Governors are confirmed by the Senate

3. False statement

   Monetary policy acts with no time lag at all

   Statements

   1. Deposit insurance protects against bank runs
   2. Bank capital is assets minus liabilities
   3. Monetary policy acts with no time lag at all

4. False statement

   Banks must borrow from the Fed before other banks

   Statements

   1. Banks must borrow from the Fed before other banks
   2. Open market operations target the federal funds rate
   3. The discount rate is paid on loans from the Fed

Instructions

Two statements are true and one is false. Tap the false one.

Explanation