Which of the Following Is the Principal Mechanism Used by the Federal

question 69

Multiple Choice

Which of the following is the principal mechanism used by the Federal Reserve to directly alter the reserves of the banking system?

• A)Changes in the discount rate.
• B)Changes in the required reserve ratio.
• C)Open market operations.

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Definitions:

Cross Elasticity

A measure of how the demand for one good responds to a change in the price of another good.

Normal Good

A good for which demand increases as the income of consumers increases, and falls when consumer income decreases.

Quantity Demanded

The total amount of a good or service that consumers are willing and able to purchase at a given price in a specified time period.

Income Elasticity

A measure that quantifies the responsiveness of the demand for a good or service to a change in income of the people demanding the good.