Question 10 (3 points) When the Fed raises the target for the federal funds rate

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Question 10 (3 points)

When the Fed raises the target for the federal funds rate, it:

Question 10 options:

Increases the required reserve ratio.

Buys government bonds.

Sells government bonds.

Lowers the discount rate.

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Question 11 (3 points)

The purpose of a restrictive monetary policy is to:

Question 11 options:

Increase the growth rate of aggregate demand.

Increase investment spending.

Reduce or keep inflation low.

Lower interest rates and make credit more readily available.

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Question 12 (3 points)

How would the Fed use open market operations (OMO) to raise interest rates:

Question 12 options:

The Fed sells bonds to banks.

The Fed reduces the reserve requirement.

The Fed sells gold certificates.

The Fed buys bonds from banks.

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Increases the required reserve ratio.

Buys government bonds.

Sells government bonds.

Lowers the discount rate.

Explanation / Answer

10. When the Fed raises the target for the federal funds rate, it sells government securities to decrease the excess reserves available for overnight loan.

Answer-option C

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