Use the Following to Answer Questions

question 138

Multiple Choice

Use the following to answer questions .
Exhibit: Monetary Policy and Long-Run Aggregate Demand and Aggregate Supply
-(Exhibit: Monetary Policy and Long-Run Aggregate Demand and Aggregate Supply) If the economy is at point b, the Federal Reserve can close the output gap by selling bonds. In the bond market,

• A) the supply curve shifts right, leading to a decrease in bond prices and an increase in interest rates.
• B) the demand curve shifts right, leading to an increase in bond prices and a decrease in interest rates.
• C) the supply curve shifts left, leading to an increase in bond prices and an increase in interest rates.
• D) the demand curve shifts left, leading to a decrease in bond prices and an increase in interest rates.

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Definitions:

Lender

An individual, a financial institution or another entity that provides funds to others with the expectation that the funds will be repaid, typically with interest.

Current Liability

This refers to debts or obligations that are due to be paid within one year or within the normal operating cycle of the business, whichever is longer.

Current Assets

Assets that are expected to be converted into cash, sold, or consumed within one year or within the normal operating cycle.

Discounted Note

A type of debt instrument that is sold or redeemed for less than its face value but whose actual value matures to the full face amount at a later date.