11. The Federal Reserve System primarily aims to a) Control any deficits in the federal budget b) Stabilize the economy through appropriate monetary policy c) Increase international trade with the rest of the world d) Decrease tax rates to have a greater circulation of currency in the economy 12. The Fed is often called a "lender of last resort" because a) It increases lending to commercial banks when there is a bank run b) It increases interest rates when there is not enough supply of money c) It increases reserves when commercial banks are hesitant to lend d) It directly lends to households and only specific types of companies 13. The main reason the United States established a central bank was a) A desire for a strong centralized financial authority b) To follow the conclusion of economic theory c) Severe inflation after the Civil War d) Disastrous experiences with financial panics 14. The Fed's tools of monetary policy during normal times are a) Government expenditures, interest rates, and taxation b) Open-market operations, lending to banks, and reserve requirements c) The money supply, government purchases, and taxation d) None of these 15. Expansionary monetary policy is implemented by the Fed to: "'(P9? a) Reduce the interest rates b) Insure deposits against bank runs c) Increase bank reserves d) Reduce public's borrowings from banks 16. When the Fed wants to expand the money supply through open-market operation, it a) Sells government securities to the Treasury b) Sells government securities to member banks c) Buys government securities from the Treasury d) Buys government securities from member banks