Under Which of the Following Circumstances Would the Federal Reserve

question 14

Multiple Choice

Under which of the following circumstances would the Federal Reserve System want to decrease the money supply by increasing the reserve requirement?

• A) The economy is experiencing severe inflation, and market activity is very low. Yet the financial institutions have a great deal of M-1 resources at their disposal that they are not investing.
• B) The economy is experiencing severe inflation, yet market activity has been extremely high and erratic.
• C) The economy is experiencing severe deflation, and market activity is very low. Yet the financial institutions have a great deal of M-1 resources at their disposal that they are not investing.
• D) The economy is experiencing severe deflation, yet market activity has been extremely high and erratic.
• E) The economy is experiencing severe deflation, market activity is very low, and most financial institutions are low on M-1 resources.

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Definitions:

Chemical Reaction

A process that involves rearrangement of the molecular or ionic structure of a substance, as opposed to a change in physical form or a nuclear reaction.

Benedict's Solution

A chemical reagent used to test for the presence of reducing sugars.

Amylase Activity

pertains to the process by which the enzyme amylase breaks down starches into simpler sugars, primarily in the digestive system.

Maltose

A sugar made from two glucose molecules bonded together, commonly produced during the digestion of starch.