A Problem That the Fed Faces When It Attempts to Control

question 82

Multiple Choice

A problem that the Fed faces when it attempts to control the money supply is that

• A)the 100-percent-reserve banking system in the U.S.makes it difficult for the Fed to carry out its monetary policy.
• B)the Fed has to get the approval of the U.S.Treasury Department whenever it uses any of its monetary policy tools.
• C)the Fed does not have a tool that it can use to change the money supply by either a small amount or a large amount.
• D)the Fed does not control the amount of money that households choose to hold as deposits in banks.

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Definitions:

Divergent Thinking

A cognitive mechanism or methodology for creating innovative concepts by considering a wide range of solutions.

Transformational Logic

A field or concept in logic that focuses on the processes and rules for transforming one logical expression or statement into another.

Field Dependence

A cognitive style characterizing individuals who tend to perceive and interpret information in a global, context-dependent manner.

Interpersonal Intelligence

One of Howard Gardner's multiple intelligences, referring to the ability to understand and interact effectively with others through effective communication and sensitivity to social cues.