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Question 19

The federal funds rate is the rate that

A.

is charged for government bonds sold in the open market
operations of the Federal Reserve

B.

banks charge for overnight use of excess reserves held at the
Federal Reserve banks

C.

the Federal Reserve charges for short-term loans to commercial
banks

D.

banks charge for loans to the most creditworthy customers

4 points

Question 20

When the Federal Reserve uses open-market operations to reduce
the federal funds rate several times over a year, it is
pursuing

A.

a restrictive monetary policy

B.

an expansionary monetary policy

C.

a prime interest rate policy

D.

a discretionary fiscal policy

4 points

Question 21

The economy is experiencing inflation and the Federal Reserve
decides to pursue a restrictive monetary policy. Which set of
actions by the Fed would be most consistent with this policy?

A.

selling government securities and raising the discount rate

B.

buying government securities and lowering the discount rate

C.

buying government securities and lowering the reserve ratio

D.

selling government securities and lowering the discount rate