A financial panic was averted in october 1987

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25) A financial panic was averted in October 1987 following “Black Monday” when the Fed announced that A) it was lowering the discount rate on extended credit. B) it would provide discount loans to any bank that would make loans to the security industry. C) it stood ready to purchase common stocks to prevent a further slide in stock prices. D) all of the above. Answer: B 26) Discount policy 93 27) Disadvantages of discount policy include 28) Disadvantages of using reserve requirements to control the money supply include 29) The Fed is reluctant to use reserve requirements to control the money supply because A) of their overly-powerful impact on the money supply. B) they have the potential to create liquidity problems for banks with low excess reserves. C) frequent changes in reserve requirements complicate liquidity management for banks. D) of all of the above. E) of only (A) and (B) of the above. Answer: D 30) When the Federal Reserve was created, its most important role was intended to be as 31) At its inception, the Federal Reserve was intended to be 94
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32) Changes in the reserve requirement are an infrequently used monetary policy tool since
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