Which of the following is the most effective tool used by the Fed?
a. Converting state-chartered banks to nationally-chartered banks
b. Shifting deposits from one District Fed to another
c. Producing currency to increase the money supply
d. Using the federal funds market
e. Open market operations
E
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A currency drain occurs when the
A) Fed increases the required reserve ratio. B) Fed sells U.S. government securities. C) non-bank public increases its holdings of currency outside the banking system. D) banks reduce the number of loans they create with their excess reserves. E) Fed buys U.S. government securities.
An indication that the economy is in recession, e.g., a rise in the number of used clothing stores for babies, suggests that
a. used clothes for babies are a necessity b. used clothes for babies are an inferior good c. used clothes for babies are a normal good d. new clothes for babies are a luxury e. used clothes for babies have price-elastic demand