The 3 Tools of the Federal Reserve

Increasing the reserve requirement has which of the following results:

• More is lent out and less is paid back in interest
• Less is lent out and more is paid in interest

In a recession, the Fed would likely do what after 9 months?

• Increase the supply of money in the economy
• Decrease the supply of the money in the economy

If the United States is experiencing high inflation, the Fed will likely

• Increase the supply of money in the economy
• Decrease the supply of money in the economy

Does increasing the money supply cause inflation or deflation?

• Inflation
• Deflation

a rise in the cost of goods and services

• inflation
• discount rate
• interest

Raising the discount rate will reduce

• unemployment
• inflation

Lowering the reserve requirement will reduce

• unemployment
• inflation

The interest rate the Fed charges commercial banks for loans

• Fed Fund Rate
• Reserve Requirement Rate
• Discount Rate

Percentage of deposits that the Fed requires banks to hold back and not lend out

This is the money kept in the vault.

• Fed Fund Rate
• Reserve Requirement Rate
• Discount Rate

If we are experiencing a severe recession, the fed should _____ the reserve requirement.

• increase
• decrease