Help with economics questions please?

Question

1) Suppose the Federal Reserve wants to decrease the rate of inflation in the U.S. What would be a good policy?

a) decrease the discount rate

b) increase taxes

c) buy government bonds on the open market

d) sell government bonds on the open market

2) Let's say th economy is in full-employment equilibrium. Then an increase in investment spending causes a positive demand shock to occur. What should the Federal Reserve do?

a) Reduce the federal funds rate.

b) Undertake a contractionary monetary policy to restore the economy to its full employment equilibrium

c) Undertake an expansionary monetary policy to bring output back to full employment

d) Nothing b/c of the conflict between the twin goals of price stability and full employment when demand shocks occur.

3) Which of the following is not part of the U.S. government's mandatory spending budget

a) social security

b) medicare

c) interest on the national debt

d) national defense

Answer 1

1) - c) buy government bonds on the open market

2) - b) Undertake a contractionary monetary policy to restore the economy to its full employment equilibrium

3) - c) interest on the national debt

Answer 2

1. d

2.d

3.c