Under the maturity extension program better known as Operation Twist between September

2011 and the end of 2012 the Federal Reserve purchased about $700 billion of longer-term

Treasury securities and sold or allowed to run off an equal amount of shorter-term Treasury

securities. This policy aimed to:

a. Put upward pressure on shorter-term bond prices and therefore lower their yields.

b. Put upward pressure on prices of financial assets (e.g. corporate bonds, mortgagebacked

securities) that investors consider to be close substitutes for longer-term

Treasury securities.

c. Put downward pressure on longer-term bond prices and therefore raise their yields.

d. All of the above answers

e. None of the above answers.

Canada, the UK, New Zealand, Australia and Sweden have no reserve requirements.

a. This means that banks in these countries can create money without limit since the

money multiplier is practically infinite.

b. This means that banks in these countries are likely to hold zero reserves at the central

bank.

c. This means the ability of banks to create money through lending is constrained by

capital requirements.

d. All of the above answers

e. None of the above answers.