When the Fed Buys Bonds in the Open Market, in the Product

question 145

Multiple Choice

When the Fed buys bonds in the open market, in the product market (the aggregate demand- aggregate supply model) ,

• A) real GDP will fall and the price level will rise.
• B) real GDP and the price level will rise.
• C) real GDP and the price level will fall.
• D) real GDP will rise and the price level will fall.

---

Definitions:

Investment Certificates

Financial products issued by banks that offer a fixed interest rate over a specified term.

College

An educational institution or establishment, primarily providing tertiary education and granting academic degrees in various subjects.

Compounded Quarterly

The calculation of interest on the principal amount and any accumulated interest four times a year.

Compounded Semi-annually

Interest calculation method that adds interest to the principal sum twice a year, resulting in interest accumulation on interest already accrued.