If the Fed Wanted to Use All Three of Its

question 1

Multiple Choice

If the Fed wanted to use all three of its major monetary control tools to decrease the money supply, it would:

• A) buy bonds, reduce the discount rate, and reduce reserve requirements.
• B) sell bonds, reduce the discount rate, and reduce reserve requirements.
• C) sell bonds, increase the discount rate, and increase reserve requirements.
• D) buy bonds, increase the discount rate, and increase reserve requirements.

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Definitions:

Mortgage

A legal agreement in which a borrower agrees to repay a lender over time, secured by real property as collateral.

Closing Costs

Expenses over and above the price of the property in a real estate transaction, such as taxes, attorney's fees, and title insurance.

Escrow Agent

A neutral third party responsible for holding assets or documents until certain conditions of an agreement are met.

Lender

An individual or institution that provides funds to another with the expectation of repayment plus interest.