Q1. Which of the three monetary policy tools is the most powerful? Why?
Q2. Which of the three monetary policy tools is the least powerful? Why?
Q3. Which of the three monetary policy tools mainly has is impact felt primarily on altering expectations? Why?
Q4. Which of the three monetary policy tools is the one which is most used? Why?
Q5. Briefly summarize what the Fed could do with its policy tools if it wished to increase the money supply?
Q6. When would it be most appropriate for the Fed to increase the money supply: during a recession or when the economy is expanding? Why?
Q7. If the GDP increases what is expected to happen to the interest rate?
Q8. When the Fed buys government bonds what happens to the price of these bonds and the interest rate?