1. Targeted asset purchases:
A. increase the supply of aggregate reserves beyond what is needed to hit interest rate targets.
B. are de facto policy decisions about future interest rate targets.
C. increase Fed reserves.
D. change the asset mix of the Fed’s balance sheet.
2. Suppose that fed funds rate is above the target rate. The most likely response by the Fed is to:
A. engage in open market sales.
B. lower the required reserve rate.
C. engage in open market purchases.
D. lower the discount rate.