1.If the Federal Reserve uses open market operations to offset a recession, the Fed ________ government securities in order to ________ the federal funds rate.

Select one:

a.sells; lower

b.sells; raise

c.buys; not change

d.buys; raise

e.buys; lower

2.If real GDP exceeds potential GDP, to move the economy to potential GDP the Fed

Select one:

a.raises the federal funds rate to increase potential GDP but not real GDP.

b.raises the federal funds rate to decrease both real GDP and potential GDP.

c.lowers the federal funds rate to decrease real GDP but not potential GDP.

d.raises the federal funds rate to decrease real GDP but not potential GDP.

e.lowers the federal funds rate to increase potential GDP but not real GDP.