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Money Policy: Market Interest Rates

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When the Fed purchases securities, the total funds of commercial banks ________ by the market value of securities purchased by the Fed. This activity initiated by the FOMC's policy directive is referred to as a ________ of money supply growth.

a. increase; loosening
b. decrease; tightening
c. decrease; loosening
d. increase; tightening.

and
A(n) ______ in the discount rate may signal a stimulative economic policy and anticipation that the Fed will attempt to ______ market interest rates

a. increase; increase
b. increase; decrease
c. decrease; increase
d. decrease; decrease.

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Response discusses money policy and market interest rates.

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When the Fed purchases securities, the total funds of commercial banks ________ by the market value of securities purchased by the Fed. This activity initiated by the FOMC's ...

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