19.3Â Â Open Market Operations 1) Which of the following is a primary policy tool of the Federal Reserve? A) The federal funds rate B) Open market operations C) The prime rate D) The money supply 2) Which of the following statements is incorrect? A) When market rates are changing, the discount rate adjusts immediately. B) Money market interest rates tend to respond quickly to Federal Reserve open market operations. C) The discount rate may be above or below other money market interest rates at a given point in time. D) All of the above are true. 3) Open market operations are A) seldom used by the Federal Reserve because they have such a large impact on bank Reserves. B) seldom used by the Federal Reserve because they have little impact on bank reserves. C) used frequently by the Federal Reserve but not as often as changes in the discount rate. D) the primary method used by the Federal Reserve to alter bank reserves. 4) When the Federal Reserve sells $100 worth of government securities, bank reserves A) rise by $100. B) rise by $100 times the deposit expansion multiplier. C) fall by $100. D) fall by $100 times the deposit expansion multiplier. 5) Immediately after the Federal Reserve buys government securities, A) bank excess reserves rise. B) bank excess reserves fall. C) bank capital rises. D) bank capital falls. 6) Which of the following is an interest rate determined by the supply and demand for loans among commercial banks? A) The discount rate B) The federal funds rate C) The prime rate D) The commercial paper rate 7) Which of the following is an administered interest rate set by commercial banks? A) The discount rate B) The federal funds rate C) The prime rate D) The commercial paper rate 8) Which of the following is an administered interest rate set by the Federal Reserve? A) The discount rate B) The federal funds rate C) The prime rate D) The commercial paper rate 9) When the Federal Reserve buys $200 worth of government securities, the money supply A) rises by $200. B) rises by more than $200. C) falls by $200. D) falls by more than $200. 10) When the Federal Reserve sells $500 worth of government securities, the money supply A) rises by $500. B) rises by more than $500. C) falls by $500. D) falls by more than $500.