If the Fed Carries Out an Open Market Operation and Sells

question 169

Multiple Choice

If the Fed carries out an open market operation and sells U.S. government securities, the federal funds rate ___________and the quantity of reserves ___________.

• A) rises; decreases
• B) falls; decreases
• C) falls; increases
• D) rises; increases

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Definitions:

Hypothesis

A proposed explanation for a phenomenon, made as a starting point for further investigation.

Theory

A systematic set of ideas intended to explain facts or phenomena, serving as a foundation for further investigation.

Normative-stage Model

A theory suggesting that human development proceeds through a series of predetermined stages associated with specific ages.

Timing-of-events Model

A statistical method used to analyze the occurrence and timing of particular events within a given timeframe, often employed in economics and social sciences to understand decision-making processes.