Use the Following to Answer Questions

question 5

Multiple Choice

Use the following to answer questions .
Exhibit: Monetary Policy 1
-(Exhibit: Monetary Policy 1) 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:

Interest

Payment for the use of another person’s money.

Bonds Payable

Bonds payable refers to long-term debt instruments issued by a company to investors, promising to pay back with interest at specified maturity dates.

Operating Activities

Cash flow activities that include the cash effects of transactions that create revenues and expenses and thus enter into the determination of net income.

Issuance of Debt

The process by which a company borrows money through the sale of bonds or taking out loans, creating a liability that must be repaid in the future.