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Free Reserves Monetary Quiz

In the 1930s, the Fed

During World War II, whenever interest rates would rise and the price of bonds would begin to fall, the Fed would

During World War II, the Fed in effect relinquished its control of monetary policy through its policy of

Under the free reserves monetary policy of the 1950s and 1960s, the Fed interpreted an increase in free reserves as

During the 1950s and 1960s, the Fed considered free reserves to be a particularly good indicator of money market conditions because it thought that free reserves

Under the free reserves monetary policy of the 1950s and 1960s, the Fed interpreted an increase in free reserves as a(n) _____ of money market conditions requiring open market _____ to withdraw reserves from the banking system.

Under the free reserves monetary policy of the 1950s and 1960s, the Fed interpreted a decrease in free reserves as a(n) _____ of money market conditions requiring open market _____ to inject reserves into the banking system.

A procyclical monetary policy causes the money supply to ______ during recessions and to ______ when the economy is growing.

A policy of targeting free reserves is likely to prove to be

In practice, the Fed’s policy of targeting _____ in the 1960s proved to be _____, destabilizing the economy.

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