Questions

a. The Fed used ________ to prevent and address financial panics that were not triggered by bank failures, such as the Black Monday stock market crash of 1987 and the terrorist destruction of the World Trade Center in September 2001.

Options

1. reserve requirement
2. open market sale
3. open market purchase
4. discount policy

b. The Fed effectively served as a lender-of-last-resort

Options

1. both B and C of the above
2. all of the above.
3. during the global financial crisis.
4. during the Great Depression.
5. after the September 11 terrorist attacks.

c. The quantity of reserves supplied equals

Options

1. total reserves minus required reserves.
2. required reserves plus borrowed reserves.
3. nonborrowed reserves plus borrowed reserves.
4. nonborrowed reserves minus borrowed reserves.

d. The discount rate is kept above the federal funds rate because the Fed prefers that ________.

Options

1. banks borrow reserves from the Fed
2. banks borrow reserves from each other
3. banks monitor each other for credit risk
4. the Fed monitor banks for credit risk