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1. Why is the U.S. Treasury market an important indicator for the rest of the economy?

1. Stress in this very large market most likely signals financial market stress more broadly.
2. The U.S. Department of the Treasury produces U.S. currency.
3. Large investors make investment decisions based on returns on U.S. Treasury securities.
4. The U.S. Treasury market accounts for most of U.S. GDP.

2. How did the onset of the pandemic affect businesses and state and local governments?

1. They found it difficult to access funds to continue operations.
2. They enjoyed the lower cost of borrowing and became more profitable.
3. They had opportunities to hire displaced workers and boost productivity.
4. They lowered workers wages and tackled additional projects.

3. How did the Fed bolster economic activity?

1. The FOMC lowered its target range for the federal funds rate to near zero percent.
2. The FOMC lowered its target for the unemployment rate.
3. The Fed increased its holdings of assets by buying gold on the open market.
4. The Fed sent stimulus checks to millions of Americans.

4. How did the Fed lower the cost of borrowing from the Fed?

1. The Fed provided access to loans from the Fed at local bank branches.
2. The Fed lowered the cost of borrowing from its discount window.
3. The Fed capped interest rates out to two years at zero.
4. The Fed lowered inflation.

5. How did the Feds purchase of U.S. Treasury securities and other financial assets help stabilize the financial system?

1. They signaled that the Fed would buy all financial assets in the economy.
2. They helped the markets for these assets to close down smoothly during social distancing.
3. They kept markets working when the financial assets were otherwise difficult to sell.
4. They helped the Fed raise cash for its own holdings.

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