Question 1 M1 and M2 Money Supply

There are three measures of money, M1, M2, and M3.What forms of money comprise M1 and M2?

Question 2 Federal Reserve Policy Tools

A.Describe the 4 tools of monetary policy.

B.What tools are used for expansionary monetary policy?

C.What tools are used in contractionary monetary policy?

Question 3 Federal Reserve Open Market Operations

How does the Federal Reserve use open market operations to increase the money supply?

Question 4 Federal Funds Rate

Why is the Federal Funds Rate the interest ate that the Fed most directly controls?

Question 5 Require Reserve Ratio

The required reserve ratio is 10%.If the Federal Reserve makes a $1 million open market purchase,

how much money can be created by banks?