Question

In the last half of the 1990s monetary policy was highly effective in the United States but highly ineffective in Japan.

• A. true
• B. false

When the Fed auctions reserves through the term auction facility, the interest rate is set by the rate offered by the highest bidder.

• A. true
• B. false

The term auction facility is the most frequently used monetary policy tool.

• A. true
• B. false

The transactions demand for money will shift to the:

• A. right when the interest rate increases.
• B. left when the interest rate decreases.
• C. right when aggregate income increases.
• D. right when aggregate income decreases.

To reduce the Federal funds rate, the Fed would:

• A. increase the discount rate.
• B. increase the reserve requirement.
• C. sell government securities.
• D. buy government securities.

Answer 1

Answer Option B) False

When the Fed auctions reserves through the term auction facility, the interest rate is set by the rate offered by the highest bidder.

Answer Option B) False

The term auction facility is not the most frequently used monetary policy tool.

Answer Option C)Right when the aggregate income increases.

The transactions demand for money will shift to the right when aggregate income increases.

Answer Option D) To reduce the Federal funds rate, the Fed would buy government securities. The reason is that when central government buys securities relaease money to commercila banks .Due to excess of money , reduces the federal fund rate.