Figure 33-7
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In Figure 33-7, the case for expansionary monetary policy and fiscal policy is strongest at point

If the Fed fears an economic downturn, it would be most likely to

a. buy additional bonds in order to reduce the federal funds rate. b. buy additional bonds in order to increase the federal funds rate. c. sell additional bonds in order to increase the federal funds rate. d. sell additional bonds in order to reduce the federal funds rate.

Exhibit 20-3 Money market demand and supply curves ? In Exhibit 20-3, assume an equilibrium with an interest rate of 15 percent and the money supply at $100 billion. The Fed uses its policy tools to move the economy to a new equilibrium at E2 with money supply of $150 billion and an interest rate of 10 percent. This change could be the result of a(n):

A. open market sale of securities by the Fed. B. higher discount rate set by the Fed. C. higher required-reserve ratio set by the Fed. D. open market purchase of securities by the Fed.