If the Interest Rate Is Below a Central Bank's Target

question 71

Multiple Choice

If the interest rate is below a central bank's target, what should the central bank do?

• A) buy bonds to increase the money supply
• B) buy bonds to decrease the money supply
• C) sell bonds to increase the money supply
• D) sell bonds to decrease the money supply

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Definitions:

Industry Demand Curve

Represents the total demand for a product or service across all consumers in a given market, showing how quantity demanded varies with price.

Infinitely Price Elastic

Describes a situation where the quantity demanded or supplied changes by an unlimited amount in response to any change in price.

Total Revenues

The overall amount of money generated by a business from its normal business operations.

Total Costs

The complete amount of money spent by a business for producing or acquiring goods or services, including both fixed and variable costs.