To speed up the economy, the Fed typically uses __________ monetary policy; and to fight against the high rate of inflation, the Fed typically uses __________ monetary policy.

When the interest rate is so low that the opportunity cost of holding money is zero, then economists say we have reached:

A) the era of total liquidity. B) the zero lower bound situation, which means the U.S. economy may be in a liquidity trap. C) full monetary saturation. D) a situation in which a nation must use caution, since monetary policy is "super" effective.

If the Treasury finances an expenditure by borrowing from the Fed, the money supply

A) and bank reserves fall. B) and bank reserves rise. C) rises while bank reserves remain unchanged. D) remains unchanged as bank reserves rise.