If the Fed Wanted to Shift to a Restrictive Monetary

question 88

Multiple Choice

If the Fed wanted to shift to a restrictive monetary policy and reduce the money supply, it could

• A) increase the interest rate paid on excess reserves encouraging banks to extend more loans.
• B) decrease the interest rate paid on excess reserves encouraging banks to extend more loans.
• C) decrease the interest rate paid on excess reserves encouraging banks to hold excess reserves rather than extend more loans.
• D) increase the interest rate paid on excess reserves encouraging banks to hold excess reserves rather than extend more loans.

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Definitions:

Negative Externalities

Costs suffered by a third party due to an economic activity, where those involved in the activity do not fully bear the cost.

Fighting Poverty

Fighting poverty involves implementing strategies and policies aimed at reducing or eliminating poverty, enhancing the quality of life for individuals and communities.

Public Good

A good that is non-excludable and non-rivalrous in consumption, meaning it can be used by everyone and one person's use does not reduce its availability to others.

Public Goods

Are goods that are non-excludable and non-rivalrous, meaning they can be used by anyone without reducing their availability to others.