If the Fed Makes an Open Market __________Of Government Securities

question 53

Multiple Choice

If the Fed makes an open market __________of government securities, the federal funds rate__________ and the immediate impact is to shift the aggregate curve__________.

• A) purchase; rises; supply
• B) purchase; falls; demand
• C) sale; falls; demand
• D) sale; rises; supply

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Definitions:

Fiscal Policy

A government's strategy for managing its budget, including taxation and spending decisions, to influence the economy.

Desired Money Holdings

This is the quantity of money individuals prefer to keep available for immediate transactions or precautionary purposes.

Initial Equilibrium

The starting point at which supply and demand are in balance before any external changes affect the market.

Interest Rate

The fee, shown as a percent of the principal, that a lender imposes on a borrower for the utilization of assets.