Question Details

The board pumps money out of the economy by 



"In the process, the money multiplies, since the banks are allowed to lend more money than they actually have, within limits set by the Federal Reserve Board. The board tries to anticipate how much the money will multiply as this process unfolds. If its calculations are right, just enough money will be created to accommodate the growth it desires for the economy. If the calculations are wrong, it would make them right by pumping some money into the economy or pumping some out." 
1. What money is being multiplied here? 
a) the money you and I hold as cash b) the money the government receives in taxes 
c) the money obtained by the Fed when it sold bonds 
d) the money spent by the Fed when it bought bonds 
2. The "limits set by the Board" refers to 
a) the Fed's legal reserve requirement b) the amount of bonds bought by the Fed 
c) the amount of bonds sold by the Fed d) the amount of cash created by the Fed 
3. What technical terminology do economists use to refer to "how much the money will multiply as this process unfolds"? 
a) the multiplier b) the money multiplier 
c) required reserve ratio d) open market operations 
4. The board pumps money out of the economy by 
a) buying bonds b) selling bonds 
c) creating cash d) lowering the reserve requirements



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