If the Federal Reserve Wants to Increase the Availability of Money

question 45

Multiple Choice

If the Federal Reserve wants to increase the availability of money and credit, it can:

• A) lower the discount rate.
• B) raise the reserve requirements.
• C) sell U.S. government bonds to the public.
• D) encourage banks to increase their prime lending rate.

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Definitions:

Price Index

A statistical measurement that tracks changes in the price level of a basket of goods and services over time.

Inventories

The raw materials, work-in-process products, and finished goods that are considered to be the portion of a business's assets that are ready or will be ready for sale.

GDP

The total value of all end products and services created within a country's borders during a certain time frame defines Gross Domestic Product.

Production

The process of creating goods or services by combining labor, capital, and raw materials in order to meet consumer demand.