1. Suppose the Fed creates excess reserves in the banking system by buying government bonds, but banks do not make more loans because economic conditions are bad. This situation is a problem of:
1. Cyclical asymmetry.
2. A restrictive money policy.
3. The net export effect.
4. A decrease in the Federal funds rate.
2. A Federal Reserve official notes: "A restrictive monetary policy can force a contraction of the money supply however an expansionary monetary policy might not achieve an expansion of the economy." The official has described the problem of the:
1. Change in taxes on monetary policy.
2. Inflexibility of monetary policy tools.
3. Cyclical asymmetry of monetary policy.
4. Political acceptability of monetary policy.