When the Fed Wants to Expand the Money Supply, It

question 20

Multiple Choice

When the Fed wants to expand the money supply, it

• A)buys government securities.
• B)sells government securities.
• C)buys common stock.
• D)sells common stock.

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Definitions:

Marginal Cost

The additional cost incurred from producing one more unit of a good or service.

Moral Hazard

The situation where one party in an agreement is tempted to take undue risks because the negative consequences of the risk will be suffered by the other party.

Efficient Level

The optimal point of production or operation where costs are minimized and productivity or utility is maximized.

Warranty

A guarantee, usually made by a seller to a buyer, promising to repair or replace a product if necessary within a specified period.