Suppose the Money Demand Curve Shifts Rightward

question 141

Multiple Choice

Suppose the money demand curve shifts rightward.Which of the following is true about the alternative policy options available with the Fed?

• A)The Fed can keep the interest rate from rising only if it increases the money supply.
• B)The Fed cannot prevent the interest rate from rising.
• C)The Fed can prevent the interest rate from rising without changing the money supply.
• D)If the Fed expands the money supply,the interest rate will rise even further.
• E)The Fed should reduce the money supply if it plans to prevent the interest rate from rising.

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Definitions:

Sleeping Pills

Medications used to aid in falling or staying asleep, typically prescribed for individuals with sleep disorders.

N3 Sleep

The deepest stage of non-REM sleep, characterized by slow brain waves called delta waves, where the body repairs and regrows tissues, builds bone and muscle, and strengthens the immune system.

Alpha Waves

Brainwave patterns associated with a state of wakeful relaxation, typically observed in the brain's electrical activity during calmness.

Relaxed

A state of physical or mental ease, free from anxiety, stress, or tension.