In the Short Run, When the Fed Decreases the Quantity

question 54

Multiple Choice

In the short run, when the Fed decreases the quantity of money

• A) bond prices rise and the interest rate falls.
• B) the demand for money increases.
• C) the supply of money curve shifts rightward.
• D) bond prices fall and the interest rate rises.

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Definitions:

Supply Curve

A graphical representation showing the relationship between the price of a good and the quantity supplied, typically upward sloping.

Sales Tax

A tax levied on the sale of goods and services, typically calculated as a percentage of the purchase price.

Perfectly Elastic

A situation in demand where consumers will buy an infinite quantity of goods at a certain price but none if the price increases even slightly.

Perfectly Inelastic

A demand situation where the quantity demanded does not change regardless of the price level.