If the Fed Conducts an Open Market Purchase of Bonds,which

question 181

Multiple Choice

If the Fed conducts an open market purchase of bonds,which of the following will happen?

• A) The interest rate will decrease,the aggregate expenditure line will shift upward,and the aggregate demand curve will shift leftward.
• B) The interest rate will increase,the aggregate expenditure line will shift upward,and the aggregate demand curve will shift rightward.
• C) The interest rate will decrease,the aggregate expenditure line will shift upward,and the aggregate demand curve will shift rightward.
• D) The interest rate will decrease,the aggregate expenditure line will shift downward,and the aggregate demand curve will shift rightward.
• E) The interest rate will increase,the aggregate expenditure line will shift downward,and the aggregate demand curve will shift leftward.

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Definitions:

Financial Arrangement

A financial arrangement is an agreement between parties regarding the management, transaction, or repayment of money, often detailing terms for loans, payments, or investments.

Hedging

A risk management strategy used to offset potential losses in investments by taking an opposite position in a related asset.

Price Fluctuations

Variations in the price levels of goods, services, or assets in a market over a period of time.

Financial Risk

Financial risk involves the potential of losing financial resources or assets due to business activities, including market fluctuations, credit risk, and liquidity risk.