The buying and selling of government securities by the Fed is known as:
a. open market operations.
b. federal bond operations.
c. treasury bond operations.
d. open bonds operations.
e. discount rate operations.
QUESTION 2When the Fed sells government securities, it:
a. lowers the cost of borrowing from the Fed, encouraging banks to make loans to the general public.
b. raises the cost of borrowing from the Fed, discouraging banks from making loans to the general public.
c. increases the amount of excess reserves that banks hold, encouraging them to make loans to the general public.
d. increases the amount of excess reserves that banks hold, discouraging them from making loans to the general public.
e. decreases the amount of excess reserves that banks hold, discouraging them from making loans to the general public.
QUESTION 3When the Fed buys government securities, it:
a. lowers the cost of borrowing from the Fed, encouraging banks to make loans to the general public.
b. raises the cost of borrowing from the Fed, discouraging banks from making loans to the general public.
c. increases the amount of excess reserves that banks hold, encouraging them to make loans to the general public.
d. increases the amount of excess reserves that banks hold, discouraging them from making loans to the general public.
e. decreases the amount of excess reserves that banks hold, discouraging them from making loans to the general public.
QUESTION 4When the Fed wishes to reduce the economy's money supply, it:
a. lowers the discount rate.
b. lowers the required reserve ratio.
c. reduces the margin requirement.
d. sells some of its government securities.
e. prints more money.
QUESTION 5When the Fed purchases government securities, it:
a. increases banks' reserves and makes possible an increase in the money supply.
b. decreases banks' reserves and makes possible a decrease in the money supply.
c. automatically raises the discount rate.
d. uses discounting operations to influence margin requirements.
e. has no effect on either the money supply or the discount rate.
QUESTION 6When the Fed conducts open market operations, it buys and sells:
a. stocks.
b. government securities.
c. foreign currency
d. gold.
QUESTION 7Which of the following is an appropriate monetary policy if the Fed wants to increase the money supply?
a. An increase in the required reserve ratio.
b. An increase in the discount rate.
c. Purchases of bonds in open market operations.
d. Higher taxes on interest income.
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