Monetary Policy and the Fed Part 2

If the FOMC determines that employment or inflation are too low, what kind

of policy might it use?

• Expansionary

• Contractionary

What is the Fed’s primary tool for steering the federal funds rate into the target range?

• Open market operations

• Reserve requirements

• Discount rate

• Interest on reserve balances

If the FOMC thinks the economy is overheating (growing too fast), what kind of policy might it use?

• Expansionary

• Contractionary