Question

The terms here refer to tools of monetary policy. Match each with its corresponding description. Two of the descriptions here don't correspond with any of these terms.

The central bank prints additional money at a higher rate.
The Federal Reserve Bank increases the share of total deposits that banks can legally loan.
The European Central Bank purchases bonds from commercial banks.
The central bank decreases the rate that it charges to commercial banks for loans.
The discount rate
The Federal Reserve requests secret bids from banks for the right to borrow money.
The U.S. Treasury serving as a lender-of-last- resort.
The reserve ratio
Open-market operation
The term auction facility
The discount rate

Answer 1

The reserve ratio - The Federal Reserve Bank increases the share of total deposits that banks can legally loan.

The reserve ratio is the percentage of deposits that banks have to keep as reserve and cannot loan. If the fed lowers the reserve ration, it means that banks can loan a higher share of the total deposits that they store.

Open-market operation - The European Central Bank purchases bonds from commercial banks.

In Open-market operations, central banks purchase bonds and other securities in the open market in order to lower the interest rate, or they sell securities in order to raise the interest rate.

The term auction facility - The Federal Reserve requests secret bids from banks for the right to borrow money.

The term auction facility is a program in which the Federal Reserve bids loans under special conditions to bidding banks.

The discount rate - The central bank decreases the rate that it charges to commercial banks for loans.

The discount rate is the rate at which central banks loan money to commercial banks.