Which of the Following Best Describes What Occurs When Monetary

question 199

Multiple Choice

Which of the following best describes what occurs when monetary authorities sell government securities?

• A) There is a decrease in the size of commercial banks' excess reserves, the money supply increases, and interest rates fall, thereby causing a decrease in investment spending and real GDP.
• B) There is a decrease in the size of commercial banks' excess reserves, the money supply decreases, and interest rates rise, thereby causing a decrease in investment spending and real GDP.
• C) There is a decrease in the size of commercial banks' excess reserves, the money supply decreases, and interest rates rise, thereby causing an increase in investment spending and real GDP.
• D) There is an increase in the size of commercial bank reserves, the money supply increases, and interest rates fall, thereby causing an increase in investment spending and real GDP.

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Definitions:

Unemployment Insurance

A government program that provides financial assistance to individuals who are unemployed through no fault of their own, offering temporary financial support while they look for new employment.

Post World War II

The period after the end of World War II, generally considered to have started in 1945, marked by significant social, political, and economic changes globally.

Stagflation

A condition of slow economic growth and relatively high unemployment accompanied by rising prices, or inflation.

Real GDP

Gross Domestic Product adjusted for inflation, representing the value of all goods and services produced over a specific time period in real terms.