When the Fed Wants to Undertake Open Market Operations, It

question 185

Multiple Choice

When the Fed wants to undertake open market operations, it

• A) can require all commercial banks to buy from or sell to it.
• B) can require all member banks to buy from or sell to it.
• C) buys or sells securities in the open market.
• D) buys securities from or sells securities to the federal government.

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Definitions:

Efficiency Wage

A wage set above the market equilibrium to increase productivity by encouraging higher effort or reducing turnover among employees.

Positive Amount of Unemployment

A situation where there is a nonzero level of unemployment in the economy, often considered normal due to frictions and transitions in the job market.

Market-clearing Wage

The wage rate at which the quantity of labor supplied equals the quantity of labor demanded.

Market-clearing Wage

The wage rate at which the quantity of labor supplied is equal to the quantity of labor demanded.