Figure 11-2 -Refer to Figure 11-2. by Shifting the Demand Curve from Demand

question 112

Multiple Choice

Figure 11-2
-Refer to Figure 11-2. By shifting the demand curve from D₁ to D₂, the Fed is exercising

• A) contractionary monetary policy to lower interest rates.
• B) expansionary monetary policy to lower interest rates.
• C) contractionary monetary policy to increase interest rates.
• D) expansionary monetary policy to increase interest rates.

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Definitions:

Monetary Policy Weapon

Tools used by central banks to control the supply of money in the economy, influencing interest rates and inflation.

Legal Reserve Requirement

The minimum amount of reserves that banks are required to hold against deposits, as mandated by central banks.

Excess Reserves

Funds that banks hold over and above the required minimum by the central bank to cover depositor withdrawals.

Open Market Operations

Actions undertaken by a central bank, such as buying or selling government securities, to control the money supply and interest rates.