When Everyone Correctly Anticipates That the Fed Will Buy Government

question 123

Multiple Choice

When everyone correctly anticipates that the Fed will buy government securities,then they know that prices will increase.Which of the following adjustments is not likely to occur?

• A) Workers will negotiate higher wages.
• B) Suppliers of resources will demand higher prices for their resources.
• C) Producers will prevent the price level from increasing and hurting their sales.
• D) Producers will raise prices.

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Definitions:

Deadweight Loss

A loss of economic efficiency that can occur when the equilibrium for a good or a service is not achieved due to market inefficiencies.

Consumer Surplus

The difference in planned versus actual spending by consumers on a good or service.

Price Discrimination

A pricing strategy where a firm charges different prices for the same product or service to different consumers, based on their ability to pay, in order to maximize profits.

Privatizing

The act of moving control and ownership from the government to private entities, including businesses, enterprises, agencies, or public services.