Which one of the following statements about open-market operations is correct? A. Open-market operations refer to the specifying of loan maximums on stock purchases. B. Open-market operations refer to central bank lending to commercial banks. C. Open-market operations refer to purchases of stocks in the New York Stock Exchange. D. Open-market operations refer to the purchase or sale of government securities by the Fed. 4. Which one of the following statements about the Fed is correct? A. The Fed directly sets both the federal funds rate and the prime interest rate. B. The Fed directly sets the prime interest rate but not the federal funds rate. C. The Fed directly sets neither the federal funds rate nor the prime interest rate. D. The Fed directly sets the discount rate and the prime interest rate. 5. Commercial banks and thrifts usually hold only small amounts of excess reserves because A. the Fed doesn't pay interest on reserves. B. the presence of such reserves tends to boost interest rates and reduce investment. C. the Fed doesn't want commercial banks and thrifts to be too liquid. D. the Fed constantly uses open market operations to eliminate excess reserves. 6. Which one of the following statements about risky investments is correct? A. Riskier investments tend to sell for prices directly correlated with expected rates of return. B. Riskier investments tend to sell for lower prices so they provide a higher expected rate of return to compensate for risk. C. Riskier investments tend to sell for higher prices; that is why they are considered to be riskier. D. Riskier investments tend to sell for higher prices so they provide a higher expected rate of return to compensate for risk. 7. If the economy were encountering a severe recession, proper monetary and fiscal policies would call for A. buying government securities, raising the reserve ratio, raising the discount rate, reducing reserves available through the term auction facility, and a budgetary surplus. B. selling government securities, raising the reserve ratio, lowering the discount rate, increasing reserves available through the term auction facility, and a budgetary surplus. C. buying government securities, reducing the reserve ratio, raising the discount rate, reducing reserves available through the term auction facility, and a budgetary deficit. D. buying government securities, reducing the reserve ratio, reducing the discount rate, increasing reserves available through the term auction facility, and a budgetary deficit. 8. Paper money (currency) in the United States is issued by the A. Federal Reserve Banks. B. national banks. C. United States Mint. D. United States Treasury. 9. A bank temporarily short of required reserves may be able to remedy this situation by A. shifting some of its vault cash to its reserve account at the Federal Reserve. B. borrowing funds in the federal funds market. C. buying bonds from the publi.