Question

True/False

Indicate whether the statement is true or false.

____     1.   Monetary policy is the system of actions taken by the Fed to influence the money supply.

____     2.   The Fed's founders viewed the Fed as a means of maintaining the money supply during economic contractions and as a lender of last resort.

____     3.   Open market operations affect the supply of reserves.

____     4.   Open market operations refer to the purchase and sales of stocks listed on the New York Stock Exchange.

____     5.   The Fed frequently uses the discount rate and the required reserve ratio as instruments of monetary policy.

Answer 1

1. True
(Fed influences money supply through monetary policy)

2. True
(Fed was viewed as a means of maintaining the money supply and lender of last resort.)

3. False
(Open market operations do not affect the supply of reserves.

4. False
(It is the purchase and sale of government securities.)

5. True
(Instruments of monetary policy used by the Fed are discount rate and the required reserve ratio.)