Monetary Policy and Federal Reserve Tools
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Questions and Answers

Which monetary policy tool involves the Fed buying or selling bonds to the public?

  • Open Market Operations (correct)
  • Changing the Discount Rate
  • Changing the Required Reserve Ratio
  • Quantitative Easing

    • What happens to the money supply when the Fed buys bonds from the public?

  • It becomes unstable
  • It increases (correct)
  • It remains the same
  • It decreases

    • Which of the following is a characteristic of Open Market Operations?

  • It sends a clear signal
  • It has an uneven regional impact
  • It is high maintenance for the Fed (correct)
  • It is not precise

    • What is the effect of a decrease in the discount rate on the money supply?

    <p>It increases</p> Signup and view all the answers

    What is the purpose of the Required Reserve Ratio (RRR)?

    <p>To regulate the money supply</p> Signup and view all the answers

    What is the monetary policy response to a recession?

    <p>Easy money</p> Signup and view all the answers

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