Quantitative Easing Involves Policies That Are Designed To

question 100

Multiple Choice

Quantitative easing involves policies that are designed to:

• A) directly increase the money supply by a certain amount.
• B) indirectly increase the money supply by decreasing interest rates.
• C) directly increase aggregate demand through increased government spending.
• D) indirectly increase aggregate demand through decreased taxes.

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Definitions:

Monopolistic Competition

A market structure in which there are many competing producers in an industry, each producer sells a differentiated product, and there is free entry and exit into and from the industry in the long run.

Barriers To Entry

Factors that prevent or hinder new competitors from easily entering an industry or area of business.

Product Differentiation

The attempt by firms to convince buyers that their products are different from those of other firms in the industry. If firms can so convince buyers, they can charge a higher price.

Perfectly Elastic

A situation in economics where the quantity demanded or supplied changes by an infinite amount in response to any change in price; depicted by a horizontal line in price-quantity graphs.