Suppose that you want to buy new rims for your car so you liquidate $2,000 of your money market mutual funds and transfer those funds into your checking account. Carefully explain how this affects M1 and M2.

What is the principal monetary policy tool used by the Fed. Why?

How do open market operations work?

Explain how the Fed used the discount loan tool immediately following the terrorist attacks on September 11, 2001. What were they trying to prevent? The Fed did the same in response to the recent financial meltdown (2008-2010)...

Calculate the issue price of a Treasury Bill if it pays $1,000 in a year when it matures and its interest rate is 3%. What is the price if the interest rate is 6%? What do you note about the price as the interest rate rises?