When the Fed Buys Bonds in the Open Market, We

question 173

Multiple Choice

When the Fed buys bonds in the open market, we can expect

• A) investment and net exports to rise.
• B) investment will rise and net exports to fall.
• C) investment will fall and net exports to rise.
• D) investment and net exports fall.

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Definitions:

Labor

The exertion of mental or physical strength by humans to create goods and services.

Fixed Cost

Fixed cost refers to a cost that does not change with the level of goods or services produced by a business over a certain period.

Production

The creation or manufacture of goods and services with the combination of labor, equipment, technologies, and raw materials.

Diminishing Returns

A principle stating that if one factor of production is increased while others are held constant, the output per unit of the variable factor will eventually decrease.