In the Context of Open Market Operations, When Inflation Is

question 16

Multiple Choice

In the context of open market operations, when inflation is a concern, the Fed sells securities to buyers who write checks to the Fed to pay for securities they bought, and the Fed withdraws these funds from banks. With fewer funds, _____.

• A)credit becomes tighter
• B)banks increase the number of loans they make
• C)the money supply increases
• D)the inflationary pressures in the economy heat up

---

Definitions:

Total Cost

The complete cost of production, including both fixed and variable costs, for a specific level of output.

Variable Cost

Costs that change in proportion to the level of production or sales, such as materials and labor.

Loan

A loan is a sum of money borrowed that is expected to be paid back with interest.

Variable Cost

Expenses that change in proportion to the activity of a business.