If the Fed Wanted to Expand the Money Supply as Part

question 181

Multiple Choice

If the Fed wanted to expand the money supply as part of an antirecession strategy, it could

• A) increase the reserve requirements imposed on commercial banks.
• B) decrease the interest rate paid on excess reserves encouraging banks to extend more loans.
• C) sell U.S. government securities and other financial assets that it is currently holding.
• D) raise the interest rate on loans extended to banks and other financial institutions.

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Definitions:

Presentment

The formal presentation of a document, such as a bill of exchange, for acceptance or payment.

Demand

The consumers' willingness and ability to purchase goods or services at a given price.

Instrument

A formal document, such as a contract, will, or security, that legally records a right, obligation, or transaction.

Good Faith

The honest intention to act without taking an unfair advantage over another party, based on the belief that others will similarly act honestly.