1. Defensive open market operations are used to _____.

balance changes in other factors that impact reserves

change the amount of reserves

raise interest rates

lower interest rates

2. Because timely information on the price level and economic growth is frequently unavailable, the Fed has adopted a strategy of _____

targeting the exchange rate, since the Fed has the ability to control this variable.

targeting the price of gold, since it is closely related to economic activity.

using an intermediate target such as a monetary aggregate.

stabilizing the CPI, since the Fed has a high degree of control over the CPI.

3. The primary motivation behind the creation of the Federal Reserve System was the desire to _____

lessen the occurrence of bank panics.

stabilize short-term interest rates.

eliminate state regulated banks.

finance World War I.