Exercise
Answer the following questions.
1. How do open market operations work?
A. The Fed buys and sells U.S. Treasuries and federal agency securities in the secondary market to speed up or slow down the economy.
B. The Fed raises and lowers margin requirements to slow or speed up speculative activity in the credit markets.
C. The Fed may lower the discount rate to make the discount window a more attractive source of borrowing.
D. The Fed raises or lowers its reserve requirements, allowing banks less or more lending ability.
2. The Federal Reserve would like to stimulate the economy. Which of the following actions would do so?
A. Buy Treasuries
B. Raise the discount rate
C. Raise the bank reserve requirements
D. Raise the margin requirements
3. Which of the following is not true of fiscal policy?
A. Fiscal policy may attempt to stimul