If the Target Rate of Interest Is Higher Than the Equilibrium

question 76

Multiple Choice

If the target rate of interest is higher than the equilibrium interest rate, the Federal Reserve will _____ Treasury bills in the open market, _____ the supply of money, and _____ the interest rate to the target rate.

• A) sell; increase; lower
• B) buy; increase; lower
• C) sell; decrease; raise
• D) buy; decrease; raise

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Definitions:

Demand

The volume of goods or services that consumers are ready and financially able to buy at several prices over a designated period.

Quantity Demanded

The total amount of a good or service that consumers are willing and able to purchase at a given price, at a specific time.

Complementary Good

A product that is consumed along with another, such that the demand for one increases the demand for the other.

Buyers

Buyers are individuals or entities that purchase goods and services for personal use, resale, or production purposes in the market.