The Original Federal Reserve Act

question 70

Multiple Choice

The original Federal Reserve Act

• A)specified open market operations as the Fed's main policy tool.
• B)specified open market operations as one of several Fed policy tools.
• C)specified that open market operations be employed by the Fed only in circumstances where discount loans were ineffective.
• D)did not specifically mention open market operations.

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Definitions:

Consumer Price Index

A gauge that determines the aggregate weighted cost of various consumer goods and services, such as healthcare, food, and transportation, for the purpose of estimating inflation figures.

Substitution Bias

The phenomenon where consumers change their preferences to buy cheaper alternatives as prices rise, which can lead to inaccuracies in measuring inflation.

Consumer Price Index

A metric assessing the weighted average cost of a selection of consumer items and services like food, transportation, and medical services, utilized to determine the inflation level.

Inflation Rate

measures the rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling.