Which of the Following Is the Most Accurate Description of Events

question 154

Multiple Choice

Which of the following is the most accurate description of events when monetary authorities increase the size of commercial banks' excess reserves?

• A) A fall in interest rates decreases the money supply, causing an increase in investment spending, output, and employment.
• B) A rise in interest rates increases the money supply, causing a decrease in investment spending, output, and employment.
• C) The money supply is decreased, which increases the interest rate and causes investment spending, output, and employment to decrease.
• D) The money supply is increased, which decreases the interest rate and causes investment spending, output, and employment to increase.

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Definitions:

Industrial Regulation

Governmental regulation of industries to correct market failures, protect consumers, and preserve competitive markets.

Social Regulation

Rules and policies designed to correct market failures that affect people's health, safety, welfare, and social wellbeing.

Administrative Costs

Administrative Costs are expenses related to the general operation of a business, including expenses such as office supplies, salaries of non-production employees, and legal and accounting services.

Compliance Costs

Expenses that businesses incur to adhere to industry regulations, standards, and laws, including the costs of implementing necessary procedures and reporting.