If
you expect the inflation rate to be 4 percent next year and a one
year bond has a yield to  


maturity
of 7 percent, then the real interest rate on this bond is

Financial
markets promote economic efficiency by

10. Since the European Central Bankinterest on reserves, banks have acost of complying with reserve requirements when compared to banks complying with the reserve requirements of the Federal Reserve.

9. The Fedʹs lender-of-last-resort function

8. The discount rate is

7.If the Fed expects currency holdings to rise, it conducts open market ______to offset the expected _______in reserves.

6. The two types of open market operations are

5. Open market sales shrink _____ thereby lowering______.

4. In the market for reserves, if the federal funds rate is between the discount rate and the interest rate paid on excess reserves, an increase in the reserve requirementthe demand of reserves and causes the federal funds interest rate to , everything else held constant.

3. The Federal Reserve usually keeps the discount rate

2. Everything else held constant, when the federal funds rate is ______the interest rate paid on reserves, the quantity of reserves demanded rises when the federal funds rate ________.