1. Analyze Interactions Now suppose that you have been saving money for a down payment on a house. If interest rates fall, would you be more or less likely to buy a house? Explain your answer.

2. Use Visual InformationSuppose you are a member of the Federal Reserve and observe that GDP is basically holding steady and unemployment is creeping up. Would you recommend increasing the money supply, decreasing it, or leaving it the same? Why? What do you hope will happen?

3. Paraphrase If the typical business cycle were a roller coaster, how would it feel to ride without any intervention from the Fed? How would it feel if the Fed timed monetary policy well? What would it be like if the Fed timed monetary policy badly?

4. How does different monetary policies interact with inflation and contraction in the economy.

7. Compare and Contrast Display a brief summary of how the influential economists Keynes, Friedman, and Hayek viewed the use of monetary policy.

3. Paraphrase (a) Why does the Fed prefer not to use reserve requirements to adjust the money supply? (b) Under what circumstances might the Fed decide to change the reserve requirement?

6. Draw Conclusions (a) How are the discount rate and the federal funds rate different? (b) Why does the Fed keep the discount rate higher than the federal funds rate?

9. Draw Inferences (a) When the Fed cuts interest rates, what effect does it expect to have on business and consumers? (b) How is the Fed influenced by market forces in making rate decisions?