What Activity Does the Fed Undertake When It Carries Out

question 111

Multiple Choice

What activity does the Fed undertake when it carries out open-market operations?

• A)It buys and sells the bonds,but not the notes,of leading U.S.corporations.
• B)It changes the legal reserve requirements for member banks.
• C)It changes the discount rate,which generally increases the amount of available credit.
• D)It provides funds so that healthy depository institutions can purchase weaker ones on the open market.
• E)It deals in the purchase and sale of U.S.government securities.

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Definitions:

Domestic Price

The price of a good or service within a country; this can be influenced by tariffs, taxes, and supply and demand.

Free Trade

An economic policy that allows imports and exports between countries with minimal or no tariff barriers.

Competition

The rivalry among businesses to attract customers, which can lead to improvements in products, services, and prices.

Efficiency

The optimal allocation of resources to maximize the production of goods and services.