COVID-19's Effects on the Economy and the Fed's Response https://research.stlouisfed.org/publications/page1-econ/2020/08/10/covid-19s-effects-on-the-economy-and-the-feds-response 1. What was one of the original purposes the Fed was created? a. The Fed was created to ensure solid and steady stock market returns for investors. b. The Fed was created to provide economic data to investors and businesses. c. The Fed was created to support small businesses in struggling communities. d. The Fed was created to provide loans and act as a backstop during financial crisis. 2. How did the COVID -19 pandemic affect the unemployment rate? a. The unemployment rate steadily increased over several months, rising from 3.5 percent to 13.3 percent. b. The unemployment rate increased from a 50-year low rate of 3.5 percent to 14.7 percent in two months. c. The unemployment rate fell as people dropped out of the labor force to shelter at home. d. The unemployment rate fell as "non-essential "businesses continued to hire but asked their employees to work from home. 3. What was the unemployment rate before the start of the pandemic in February 2020? a. 14.7% b. 3.5% c. 9.2% d. 13.3% 4. What is the unemployment rate for the month of March 2021? (Please refer to Bureau of Labor Statistics website) www.bls.gov a. 3.5% b. 14.7% c. 6.0% d. 7.9% 5. As the data started to reveal the severity of the slowdown, how did businesses and investors seek to reduce financial risk? a. Reduce holdings of risky financial assets and increase holdings of cash b. Reduce holdings of cash and increase holdings of risky financial assets c. Borrow from the Federal Reserve's discount window d. Borrow money from the Federal Reserve at the federal funds rate 6. Why is the U.S. Treasury market an important indicator for the rest of the economy? a. Stress in this very large market most likely signals financial market stress more broadly. b. The U.S. Department of the Treasury produces U.S. currency. c. Large investors make investment decisions based on returns on U.S. Treasury securities. d. The U.S. Treasury market accounts for most of U.S. GDP. 7. How did the onset of the pandemic affect businesses and state and local governments? a. They found it difficult to access funds to continue operations. b. They enjoyed the lower cost of borrowing and became more profitable. c. They had opportunities to hire displaced workers and boost productivity. d. They lowered worker's wages and tackled additional projects. 8. How did the Fed bolster economic activity? a. The FOMC lowered its target range for the federal funds rate to near zero percent. b. The FOMC lowered its target for the unemployment rate. c. The Fed increased its holdings of assets by buying gold on the open market. d. The Fed sent stimulus checks to millions of Americans. 9. How did the Fed lower the cost of borrowing from the Fed? a. The Fed provided access to loans from the Fed at local bank branches. b. The Fed lowered the cost of borrowing from its discount window. c. The Fed capped interest rates out to two years at zero. d. The Fed lowered inflation. 10. How did the Fed's purchase of U.S. Treasury securities and other financial assets help stabilize the financial system? a. They signaled that the Fed would buy all financial assets in the economy. b. They helped the markets for these assets to close down smoothly during social distancing. c. They kept markets working when the financial assets were otherwise difficult to sell. d. They helped the Fed raise cash for its own holdings. 11. How did the Fed's liquidity and credit facilities support the flow of credit in the economy? a. They showed how the Fed could start its own bank. b. They kept markets working when the financial assets traded in those markets were difficult to sell. c. They led to the hiring of many workers who took on more credit. d. They signaled that the Fed would provide all of the credit to the economy. 12. Who is the present chairman of the Fed? a. Janet Yellen b. Ben Bernanke c. Jerome Powell d. Alan Greenspan