Which of the Following Fed Actions Will Decrease the Money

question 54

Multiple Choice

Which of the following Fed actions will decrease the money supply?

• A) an open market purchase of Treasury bills
• B) an increase in the required reserve ratio
• C) a decrease in the discount rate relative to the federal funds rate
• D) all of the above
• E) none of the above

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Definitions:

Price Elasticity

A measure of how much the quantity demanded of a good changes in response to a change in its price, indicating how sensitive consumers are to price changes.

Elastic Section

Part of a demand curve where a small change in price leads to a relatively large change in quantity demanded, indicating high price sensitivity.

Demand Curve

A graphical representation showing the relationship between the price of a good and the quantity of the good demanded by consumers.

Perfectly Inelastic

A market condition where the quantity demanded or supplied does not change regardless of a price change.