1) If the economy is suffering from a recession, the Federal Reserve should

buy bonds and raise the discount rate.

buy bonds and lower the discount rate.

buy bonds and raise the reserve requirement.

sell bonds and lower the reserve requirement.

sell bonds and lower the discount rate.

2) Which of the following combinations of fiscal and monetary policies will cause the greatest increase in real GDP?

Fiscal Policy / Monetary Policy

Increase personal income taxes / Buy bonds

Increase government spending / Buy bonds

Decrease personal income taxes / Increase the discount rate

Decrease government spending / Increase the discount rate

Decrease personal income taxes / Sell bonds

3) Which of the following would necessarily result in an increase in the value of the dollar and an increase in real interest rates?

Open market purchase of US government bonds by the Fed.

Taxes increase.

Discount rate decreases.

Government spending decreases.

Open market sale of US government bonds by the Fed.