GED Social Studies : Monetary Policy and System

Study concepts, example questions & explanations for GED Social Studies

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Example Questions

Example Question #1 : Monetary Policy And System

The American banking system is controlled by __________

Possible Answers:

The Federal Reserve.

The Department of the Interior.

The Federal Deposit Insurance Corporation.

The Federal Trade Commission.

The Secretary of State.

Correct answer:

The Federal Reserve.

Explanation:

The Federal Reserve System was created in 1913 in response to a series of financial panics. It is tasked with regulating and controlling the American banking system, which includes controlling the money supply, setting interest rates, and regulating the behavior of financial institutions.

Example Question #2 : Monetary Policy And System

Which of the following institutions is the central bank of the United States and charged with conducting monetary policy?

Possible Answers:

Security and Exchange Commission

United States Mint

Federal Reserve System

Department of the Treasury

Department of Commerce

Correct answer:

Federal Reserve System

Explanation:

The Federal Reserve System is comprised of the Federal Open Market Committee, which conducts monetary policy for the US economy, and a set of regional banks that provide services and regulation for private banks in a given region. The Federal Reserve System (often shortened to Federal Reserve or simply "the Fed") was established in 1913 in response to a number of financial crises that had plagued the United States throughout its history. It functions as a central bank that provides credit and banking services to all private banks in the country. Through its operation as a "bank for the banks", it controls the supply of money within the US economy. Economists widely believe that the Fed's maintenance of the money supply is an important factor in preserving growth and fighting of recessions. 

Example Question #3 : Monetary Policy And System

The seminal economic text of capitalism, The Wealth of Nations, was written by __________.

Possible Answers:

Thomas Malthus

Oliver Cromwell

Nicholas Copernicus

Adam Smith

John Locke

Correct answer:

Adam Smith

Explanation:

Adam Smith was a British economist and writer in the eighteenth century. He was a famous advocate of laissez-faire capitalism (the idea that the government should have minimal interference in the economy). His most famous work, The Wealth of Nations, remains influential to this day, and is something of a shrine to free-market capitalism.

Example Question #4 : Monetary Policy And System

The Panic of 1837 is an example of __________.

Possible Answers:

America’s nineteenth-century isolationism

America’s worsening relations with Great Britain

an economic collapse

a loss of faith in the political system

the negative effects of the media

Correct answer:

an economic collapse

Explanation:

The Panic of 1837 was an economic crisis, or collapse, that lasted for several years and dramatically worsened the state of the American economy. The term, "panic," is frequently used to describe a period of economic recession, depression, or instability.

Example Question #5 : Monetary Policy And System

The economic system of European colonialism, whereby the colony exists solely to facilitate the redistribution of wealth, prosperity, and resources back to the mother country, is called __________.

Possible Answers:

recidivism

restricted capitalism

progressivism

mercantilism

socialism

Correct answer:

mercantilism

Explanation:

Mercantilism was the prevailing economic theory of the sixteenth and seventeenth centuries of European history. It was gradually replaced by free-market capitalism in the eighteenth and nineteenth centuries as, essentially, the European nations realized they could make even more money this way. In the mercantilist system, the primary economic goal of government was to establish trade monopolies and colonies to help with the redistribution of wealth and resources back to the mother country. Mercantilism was particularly influential in the histories of the Dutch, French, English, and Spanish Empires.

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