What Activity Does the Fed Undertake When It Carries Out

question 111

Multiple Choice

What activity does the Fed undertake when it carries out open-market operations?

• A)It buys and sells the bonds,but not the notes,of leading U.S.corporations.
• B)It changes the legal reserve requirements for member banks.
• C)It changes the discount rate,which generally increases the amount of available credit.
• D)It provides funds so that healthy depository institutions can purchase weaker ones on the open market.
• E)It deals in the purchase and sale of U.S.government securities.

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Definitions:

Discretionary Economic Policy

Economic policies that are based on the judgment and decisions of policymakers rather than set by predefined rules or automatic mechanisms.

Keynesians

Adherents to the economic theories of John Maynard Keynes, emphasizing the importance of total spending in the economy and government interventions to stabilize economic cycles.

Classical Economists

Early economic theorists who focused on the forces of supply and demand, competition, and free markets as the drivers of economic prosperity.

Monetarists

Economists who emphasize the role of governments in controlling the amount of money in circulation as the primary method for stabilizing the economy and combating inflation.