If a Central Bank Wants to Implement a Contractionary Policy

question 93

Multiple Choice

If a central bank wants to implement a contractionary policy that decreases real GDP, it conducts an open market operation by ________ securities. Bank reserves ________ and the supply of loanable funds ________. The quantity of money ________.

• A)selling; decrease; decreases; decreases
• B)purchasing; decrease; decreases; decreases
• C)purchasing; decrease; increases; decreases
• D)selling; increase; increases; increases
• E)purchasing; increase; increases; increases

---

Definitions:

Contract Discharge

The conclusion of a contractual obligation, either through completion of the contract terms, mutual agreement, or other legal methods.

Novation

The process of substituting a new contract or obligation for an old one, requiring the agreement of all parties involved.

Three-Part Test

A methodological framework consisting of three criteria used to evaluate the validity, legality, or effectiveness of something.

Tendered Performance

The act of offering or presenting for acceptance a performance of obligations under a contract.