In the Money Market, in the Short Run in Order

question 43

Multiple Choice

In the money market, in the short run in order to decrease the nominal interest rate, the Reserve Bank must

• A) decrease the demand for money.
• B) directly lower the interest rate and not change either the demand for money or the supply of money.
• C) increase the discount rate.
• D) increase the quantity of money.
• E) decrease the quantity of money.

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Definitions:

H+

The proton, often representing an acid in chemistry, capable of forming hydronium ions (H3O+) in solution.

Reactive Intermediate

Highly reactive species formed transiently in the course of a chemical reaction.

Hydroxide

A negatively charged ion (OH-) consisting of oxygen and hydrogen.

Diazomethane

A highly reactive organic compound with the formula CH2N2, used in organic synthesis to introduce methyl groups or to form diazo compounds.