When the Fed Purchases More Bonds And, Thereby, Increases the Money

question 165

Multiple Choice

When the Fed purchases more bonds and, thereby, increases the money supply, the initial effects of the more expansionary monetary policy will often be weakened as a result of

• A)lower nominal interest rates and a decline in the velocity of money.
• B)higher nominal interest rates and a decline in the velocity of money.
• C)higher nominal interest rates and an increase in the velocity of money.
• D)lower real interest rates and an increase in the velocity of money.

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Definitions:

Tax Burden

The measure of taxation imposed on individuals, businesses, or goods, often expressed as a percentage of income or sales price.

Excise Tax

A tax levied on specific goods, services, or transactions, often to discourage consumption or generate revenue for specific purposes.

Tax Revenue

The income that is gained by governments through taxation, which is used to fund public services and government obligations.

Government

The organization, machinery, or agency through which a political unit exercises authority and performs functions and which is usually classified as democratic, authoritarian, etc.