An Open Market Sale of Bonds by the Central Bank

question 42

Multiple Choice

An open market sale of bonds by the central bank will cause which of the following when a liquidity trap situation exists?

• A)The interest rate will increase.
• B)The interest rate will not change.
• C)Output will decrease.
• D)The money supply, M, will not change.
• E) none of the above

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Definitions:

Mail

The system by which letters, packages, and other types of correspondence are delivered from one location to another.

Reasonable Time

A legal standard referring to a time period that is fair and appropriate under the circumstances for performing a legal duty or obligation.

Mortgage

A legal agreement by which a bank, lending institution, etc., lends money at interest in exchange for taking title of the debtor's property, with the condition that the conveyance of title becomes void upon the payment of the debt.

All-Expense-Paid Trip

A travel package in which all costs, including transportation, lodging, and meals, are covered.