Using the Money Demand and Money Supply Model,an Open Market

question 242

Multiple Choice

Using the money demand and money supply model,an open market purchase of Treasury securities by the Federal Reserve would cause the equilibrium interest rate to

• A)increase.
• B)decrease.
• C)not change.
• D)increase if the economy is in a recession.

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Definitions:

Psychological Tension

A mental or emotional strain resulting from conflicting, demanding, or challenging situations.

Creditworthiness

A valuation of the likelihood that a borrower can fulfill their financial obligations.

Economic Significance

Refers to the impact of a phenomenon, action, or policy on the economy's performance, often measured through its effects on growth, employment, and productivity.

Repeated Experience

An occurrence or event that happens multiple times, allowing individuals or organizations to gain insight or familiarity through its repetition.