1.When the Fed fears inflation, the Fed ________ government securities, so that the federal funds rate ________ and the quantity of money ________.

Select one:

a.sells; falls; decreases

b.sells; falls; increases

c.sells; rises; decreases

d.buys; falls; increases

e.buys; rises; decreases

2.When the Fed worries about inflation, it ________ the federal funds rate and, in the short run, ________ the real interest rate.

Select one:

a.lowers; lowers

b.does not change; the Fed raises

c.raises; lowers

d.lowers; raises

e.raises; raises