Recall the Application About the Possible Link Between the Value

question 65

Multiple Choice

Recall the Application about the possible link between the value of the U.S. dollar and the worldwide increase in commodity prices to answer the following question(s) . Starting in the summer of 2010, there was a rise in prices of commodities such as oil and food worldwide. Some economists suggested that monetary policy in the United States was the cause of the worldwide commodity boom.
-According to this Application, some economists noticed that the change in the value of the U.S. dollar was largely due to the change in interest rates, and the change in interest rates occurred because of the Fed's use of ________ to further stimulate the economy.

• A) open market sales
• B) quantitative easing
• C) discount operations
• D) open market purchases

---

Definitions:

Money Supply

The money supply is the total amount of money—cash, coins, and balances in bank accounts—in circulation within a country's economy at a given time.

Discount Rates

Discount rates refer to the interest rate charged to commercial banks and other financial institutions for loans received from the central bank's discount window.

Federal Funds Rate

The interest rate banks and other depository institutions charge one another on overnight loans made out of their excess reserves.

Borrowed Reserves

Funds that commercial banks borrow from the central bank to meet reserve requirements, often indicative of a tight monetary policy.