When the Fed Sells Bonds, the Fed

question 112

Multiple Choice

When the Fed sells bonds, the Fed:

• A)reduces the reserves and the federal funds rate increases.
• B)increases the reserves and the federal funds rate decreases.
• C)reduces the reserves and the federal funds rate decreases.
• D)increases the reserves and the federal funds rate increases.

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Definitions:

Coupons

Vouchers or codes that offer a discount on the purchase price of goods or services, usually issued by manufacturers or retailers to stimulate demand.

Two-part Tariff

A pricing strategy that involves a fixed charge plus a variable usage rate.

Marginal Profit

The increase in profit that results from selling one additional unit of a product.

Perfect Price Discrimination

A pricing strategy where a seller charges the maximum possible price for each unit consumed that buyers are willing to pay, capturing the entire consumer surplus.