Which best describes a central bank's primary role?
  • increased inflation
  • creating monetary policy
  • storing money for banks
  • It increases the money supply.
What is a potential negative effect of an expansionary policy?
  • It increases the money supply.
  • storing money for banks
  • the Federal Reserve Bank
  • increased inflation
Which statement best describes how the Fed's use of open market operations affects banks?
  • the Federal Reserve Bank
  • It increases the money supply.
  • It affects banks' liquidity.
  • It offers banks financial protection to keep consumers from panicking.
Which statement best describes how the Fed responds to recessions?
  • It affects banks' liquidity.
  • storing money for banks
  • increased inflation
  • It increases the money supply.
If the domino effect occurs as a result of changes in the money supply, what will most likely happen as an immediate result of banks having more money to lend?
  • Interest rates will decrease.
  • It is interest on money held in reserve.
  • It increases the money supply.
  • It affects banks' liquidity.
Economists studying the money supply categorize the status of the money based on
  • the Federal Reserve Bank
  • liquidity
  • increased inflation
  • It affects banks' liquidity.
Why does the Fed pay interest to banks?
  • It is interest on money held in reserve.
  • It offers banks financial protection to keep consumers from panicking.
  • It increases the money supply.
  • the Federal Reserve Bank
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