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Free U.S. Federal Reserve Bank Economist Exam Exam Questions and Answers
Last updated: March 30, 2025
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U.S. Federal Reserve Bank
Economist Exam
#Question
How does a decrease in the money supply typically impact inflation?
A.
No effect
B.
Decreases inflation
C.
Stabilizes inflation
D.
Increases inflation
Correct Answer:
B
A decrease in the money supply typically decreases inflation by reducing the amount of money available for spending.
#Question
What is the likely effect of a tax cut on consumer spending?
A.
Decreases spending
B.
No effect
C.
Stabilizes spending
D.
Increases spending
Correct Answer:
D
A tax cut typically increases consumer spending as individuals have more disposable income to spend.
#Question
How does the Fed's dual mandate affect its response to economic shocks?
A.
It prioritizes consumer spending
B.
It only focuses on employment
C.
It balances inflation and employment goals
D.
It ignores inflation
Correct Answer:
C
The Fed's dual mandate requires it to balance its response to economic shocks by addressing both inflation and employment goals.
#Question
What is a potential consequence of a deflationary economy?
A.
Inflation stabilization
B.
Decreased business investment
C.
Higher job growth
D.
Increased consumer spending
Correct Answer:
B
A deflationary economy can lead to decreased business investment as firms anticipate lower future demand and profits.
#Question
How does a strong labor market influence Fed policy decisions?
A.
Decreases consumer spending
B.
Encourages rate cuts
C.
Has no impact
D.
Leads to interest rate hikes
Correct Answer:
D
A strong labor market often leads the Fed to consider raising interest rates to prevent inflation from rising too quickly.
#Question
What is the primary goal of the Federal Reserve's open market operations?
A.
Regulate bank reserves
B.
Set interest rates
C.
Manage inflation through money supply
D.
Control government spending
Correct Answer:
C
The primary goal of the Federal Reserve's open market operations is to manage inflation by controlling the money supply through buying and selling government securities.
#Question
What does the term "shadow banking" refer to?
A.
Government-controlled banking
B.
Traditional banking
C.
Non-bank financial intermediaries
D.
Regulated financial institutions
Correct Answer:
C
Shadow banking refers to non-bank financial intermediaries that provide services similar to traditional banks but operate outside regulatory oversight.
U.S. Federal Reserve Bank Economist Exam
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