1. To increase the supply of money, the Fed should_______ bonds.
2. Increasing reserve requirements _______ the supply of money.
3. Banks trade reserves with one another in the _______ market.
4. Banks borrow from the Fed at the rate.
5. Purchasing Foreign Currency. What would happen to the supply of money if a central bank purchased foreign currency held by the public?
6. China s Increase in Reserve Requirements. The Chinese government purchased U.S. dollars in the foreign exchange market with Chinese currency. During the same period, the Chinese sharply raised the reserve requirement on banks because they wanted to prevent the money supply from expanding too rapidly. Explain carefully how these two actions, taken together, could keep the supply of money in China from increasing.
7. Other Channels of Monetary Policy. Consider this quote: Monetary policy does not work simply through lowering interest rates. Sometimes it can directly affect particular credit markets in the economy. Can you give an example of actions that the Fed has taken that fit this quotation?