Question

 During the Great Depression of the 1930's, the Federal Reserve Bank (The Fed) did not inject any cash into the failing banking system nor did it save any of the banks that failed from 1929 to 1932. This "do nothing" policy monetary policy was one of the major causes that helped to create the disastrous Great Depression.

 True or Folse

 What are excess reserves?

 What does the term "monetize" mean when speaking about monetary policy?

 According to our Federal Reserve PowerPoint, the QE3 program was started by the Fed during September 2012 The Fed started to issue $85 billion per month in new money supply and they used most of this new money to buy U.S. Treasury bonds and to buy mortgage securities from banks. The QE3 program was trying to stimulate the economy.

 True or False

Answer 1

Answer 1: False

EXPLAINATION: Before recession 1929-32 Fed followed tight money policy hence blamed by economists like Milton Friedman for this great depression. Rather do nothing pplicy was being followed by US government not by Fed.

Answer 2: C

Answer:Excess reserves are bank reserves held by a bank in excess of a reserve requirement for it set by a central bank.It is of safety buffer type and This buffer increases the safety of the banking system specially in times of economic uncertainty.

Answer 3:D

EXPLAINATION: Fed can monetize either by purchasing government bonds and giving cash to it or by printing new money and give it to government.

Answer 4:False

EXPLAINATION:QE3 program a Quantitative easing policy in which bank started buying mortgage backed securities and Treasury.In this Fed decided buying an additional $40 billion (not $85 billion) in mortgage-backed securities each month until it sees improvement in the labor market.