An Appropriate Policy Response by a Central Bank to an Increase

question 29

Multiple Choice

An appropriate policy response by a central bank to an increase in the inflation rate is to

• A)increase bank reserves
• B)lower the federal funds rate
• C)buy government bonds from the public
• D)sell government bonds to the public
• E)none of the above

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Definitions:

Inventory Write-down

A reduction in the book value of inventory that reflects a decrease in the market value of the items or their usability.

Equity Profit

The portion of net income attributable to the equity holders of a company, representing their share of the earnings.