1) To decrease aggregate demand, the Federal Reserve would
a) sell Treasury bonds.
b) increase the money supply.
c) buy Treasury bonds.
2) When banks find themselves with excess reserves, they typically
a) encourage the Federal Reserve to raise the required reserve ratio.
b) lend out new loans.
c) sell Treasury bonds to Federal Reserve.
3) When the Federal Reserve buys Treasury bonds from the public in the open market
a) the money supply contracts.
b) the money supply expands.
c) the demand for money expands.
d) there is no change in the money supply.
4) if the Fed increases the discount rate,
a) banks will face a higher cost of borrowing and will pass some of this cost onto customers in terms of higher interest rates.
b) it will be easier for banks to borrow the money needed to provide a higher volume of commercial loans.
c) it will then increase the required reserve ratio as well.