Economics homework help !!!

Question

Suppose the Fed decides fight a recession Which of the following would be the best medicine to use

a. increase excess reserves

b. decrease excess reserves

c. increase personal income taxes

d. increase the discount rate

The members of the board of governors are

a. voted in by the public

b. voted in by presidents of commercial banks

c. nominated by president and approved by congress

d. voted in by presidents of each federal reserve bank district

Suppose the Fed thinks that the economy is heading for a period of unnecessary inflation. To prevent this from happening it can

a. buy bonds to increase interest rates

b. lower the discount rate to reduce borrowing

c. sell bonds in order to decrease interest rates

d. raise the required reserve ratio

Answer 1

1: d. increase the discount rate

Increasing discount rate will make money relatively "cheaper", thus more affordable for economic agents.

#2: c. nominated by president and approved by congress

http://www.federalreserve.gov/generalinf...

#3: d. raise the required reserve ratio

Raising required reserve ratio will reduce money-supply and consequently increase interest rates, money will become less affordable for anyone in economy, thus it's value will increase slowing down inflation.