Monetary Policy and Open Market Operations

1. Monetary policy is defined as the A taxing and spending decisions of the United States Government. B buying and selling of currency in foreign exchange markets. C interaction of buyers and sellers in the market place. D decisions of the Federal Reserve System that determine the money supply.

2. The actions of the FED that control and regulate the amount of money in the economy are referred to as A fiscal policy. B monetary policy. C international trade. D opportunity costs.

3. When the Fed is conducting open market operations, they are buying or selling A stocks on the New York Stock Exchange. B goods in the product market. C factors in the factor market. D government bonds.

key D B

Understanding the Big Picture What is monetary policy? Regulating the amount of money in the economy Who regulates the amount of money in the economy? Federal Reserve How do they regulate the amount of money in the economy? 3 tools- open market operations (buying and selling of bonds), reserve requirement, discount rate