If the Fed Wishes to Reduce the Money Supply,it Can

question 127

Multiple Choice

If the Fed wishes to reduce the money supply,it can do all of the following except

• A)Raise the discount rate.
• B)Raise the minimum reserve ratio.
• C)Sell securities on the open market.
• D)Buy shares of common stock in a large bank.

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Definitions:

Bank A

A generic term used to denote a financial institution licensed to receive deposits, offer loans, and provide other financial services to its customers.

Inflationary GDP Gap

The excess amount by which the actual gross domestic product (GDP) exceeds the potential GDP, leading to inflation.

Aggregate Demand

The total demand for all goods and services within an economy at a given overall price level and within a specific time frame.

Monetary Policy

The process by which a country's central bank or monetary authority manages its money supply to achieve specific goals such as controlling inflation, maintaining employment, and stabilizing the currency.