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How Much Do You Know About the Federal Reserve?
Test your knowledge of the mild-mannered economists who really keep this country humming. But please, no wagering.

1. The Federal Reserve System can best be described as ...

A. A division of the U.S. Treasury Department
B. The central banking system for the United States
C. Economic policy advisors to the president
D. The hottest techno-rave music act on the circuit

2. The Federal Reserve System is controlled by ...

A. The Board of Governors of the Federal Reserve
B. The U.S. Treasury Department
C. The Federal Deposit Insurance Corp. (FDIC)
D. Congress.

3. Federal Open Market Committee consists of how many members?

A. Five
B. Seven
C. Eleven
D. Twelve

4. Members of the Board of Governors of the Federal Reserve ...

A. Are elected by member banks for four-year terms
B. Are appointed by Congress for 12-year terms
C. Are appointed by the President for 14-year terms
D. Are appointed by federal judges for six-year terms

5. If the FOMC decides to expand the money supply it would ...

A. Deliver new Federal Reserve notes to banks
B. Issue directions to sell government securities
C. Issue directions to buy government securities
D. Raise the discount rate to member banks

6. The relationship between bond prices and interest rates is?

A. When bond prices rise, interest rates rise
B. When bond prices fall, interest rates rise
C. When interest rates rise, bond prices rise
D. None of the above

7. What tool does the Fed rely on the most in conducting policy?

A. Changing the discount rate
B. Open market operations
C. Changing the required reserve ratio
D. Will power

8. An open market purchase of bonds by the Fed causes ...

A. The money supply to rise and bond prices to go up
B. The money supply to fall and bond prices to go up
C. The money supply to rise and bond prices to fall
D. The money supply to fall and bond prices to fall

9. What must the government do to reduce high inflation?

A. Increase spending and decrease the money supply
B. Decrease spending and increase the money supply
C. Decrease both spending and the money supply
D. Increase both spending and the money supply

10. The Federal Open Market Committee is required by law to meet at least how many times per year?

A. Two
B. Four
C. Six
D. Eight

2000 The Washington Post Company





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