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CHAPTER 7 - Chapter 7 Conduct of Monetary Policy Tools...

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Chapter 7 Conduct of Monetary Policy: Tools, Goals, and Targets 7.1 Multiple Choice 1) An open market purchase of securities by the Fed will A) increase assets of the nonbank public and increase assets of the banking system. B) decrease assets of the nonbank public and increase assets of the Fed. C) decrease assets of the banking system and increase assets of the Fed. D) have no effect on assets of the nonbank public but increase assets of the Fed. E) increase assets of the banking system and decrease assets of the Fed. Answer: D 2) An open market sale of securities by the Fed will 3) If the Federal Reserve wants to expand reserves in the banking system, it will 4) If the Federal Reserve wants to lower the monetary base and the money supply, it will 5) A discount loan by the Fed to a bank causes A) an increase in reserves in the banking system and a decrease in the monetary base. B) a decrease in reserves at the Fed and a decrease in the monetary base. C) a decrease in reserves in the banking system and a decrease in the monetary base. D) an increase in reserves in the banking system and an increase in the monetary base. Answer: D 89 6) When a bank repays a discount loan to the Fed, there is 7) The federal funds rate is
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