Question

4. When the Fed lowers, the discount rate, money is easy to obtain as before the...

4. When the Fed lowers, the discount rate, money

is easy to obtain as before the action
Is easier to obtain
Is harder to obtain
Cannot be obtained
Is not as easy to obtain as before

5. From 1945 to 2009, the U.S experienced 11 recessions. The average duration of each recession was 10 months. The longest recession occurred for 18 months during the years:

1929-1931
1940-1941
2000-2001
2008-2009

6. One method the federal reserve system users to slow the economy is to

Sell government bonds to banks and other businesses
Decrease reserve requirements
Decrease the discount rate
Buy government securities
Decrease salaries paid to the board of governors

7. The economy has been very strong for several years, and business is booming. However, prices have begun to increase, and there is fear that this increase may continue for an extended period of time. Which of the following actions could the Fed take to counteract the increasing prices?

Raise the discount rate
Lower the reserve requirement
Buy government bonds
Increase the overall supply of money
Decrease overall interest rates

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Homework Answers

Answer #1

4]

The correct option is - Is easier to obtain

This is because it is cheaper for banks to borrow

5]

2008-2009

6]

The correct option is - Sell government bonds to banks and other businesses

This decreases money supply and increases interest rates. As it becomes more expensive to borrow, the economy slows down as consumption and private investment decrease

The other options (except salaries) are incorrect because they increase money supply.

7]

The correct option is - Raise the discount rate.

This will raise interest rates, and thus counteract inflation.

The other options are incorrect because they will increase money supply, and increase inflation.

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