Fed Policy Procedures: Historical Perspective
1) The Fed accidentally discovered open market operations when A) it came to the rescue of failing banks in the early 1930s, and found that its purchases of bank loans injected reserves into the banking system.
B) it purchased securities for income following the 1920 1921 recession.
C) it attempted to slow inflation in 1919 by selling securities and found that its sales drained reserves from the banking system.
D) it reinterpreted a key provision of the Federal Reserve Act.
2) The Fed”s mistakes of the early 1930s were compounded by its decision to
A) raise reserve requirements in 1936 1937.
B) lower reserve requirements in 1936 1937.
C) raise the monetary base in 1936 1937.
D) lower the monetary base in 1936 1937.
3) During World War II, whenever interest rates would ________ and the price of bonds would begin to ________, the Fed would make open market purchases.
A) rise; rise
B) rise; fall
C) fall; rise
D) fall; fall