Question

1. The primary function of the Fed is to

		charter national banks.
		regulate the supply of money in the world to support capitalism.
		appoint its board members.
		charter district banks.
		regulate the supply of money in the United States so as to maintain a healthy economy.

2.When reserve requirements are low, there is

		an increase in the overall money supply.
		less money to lend customers.
		a reduction in the overall money supply.
		an economic slowdown.
		None of these answers are correct.

3.When the Fed buys government securities, there is less money in the economy available for investment, purchases, or lending.

True

False

Answer 1

1. option e is correct option. Primary function of fed is to manage inflation and this can be done by regulating money in the United States so as to maintain a healthy economy.

2. Option a is correct. When reserve requirements are low then bank have to mantain low capital which can be used to increase liquidity in the economy. Increase in the overall money supply

3. False. When Fed purchases security it injects liquidity in the economy which boosts the economy. Hence there is more money in the economy.