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BI U ~ ab x, x A ~ A E 1 Normal 1 No Spac... Heading 1 Heading 2 Title Subtitle Font Paragraph Styles 17. The Fed uses the federal funds rate as the short-term monetary policy instrument to achieve the goals of price stability and full-employment output. And the Fed raises or cuts the federal funds rate (equivalently saying, decreases or increases money supply, respectively) through the Open Market Operation. In order to lower the interest rate, the Fed would need to Treasury bonds through the Open Market Operation a sell b. buy 18. The U.S. monetary policy is conducted to achieve two goals of price stability and full-employment output. In the short run, monetary policy can influence economic activity through the monetary transmission mechanism. Which of the following is false? a Monetary expansion tends to encourage consumption by lowering the interest rate. b. Monetary expansion tends to encourage investment by lowering the interest rate. c. Monetary expansion tends to lead to appreciation of the domestic currency, which encourages the foreign imports d. Monetary contraction leads to lower asset prices, which tends to discourage investment. e. All of the above are correct 21. Federal funds are: a funds raised by the federal government in the bond market. b. loans made by the Federal Reserve System to banks. c. loans made by banks to the Federal Reserve System. d. loans between banks of their deposits at the Federal Reserve System

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