A Type of Public Policy That Might Be Set in Response

question 38

Multiple Choice

A type of public policy that might be set in response to the rising prices of a basic necessity,such as food,might be:

• A)to make it illegal to charge high prices for the good.
• B)to subsidize the price of basic necessities.
• C)to pay producers to make more of the good.
• D)All of these are ways government can address the shortage of a basic necessity.

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Definitions:

Excess Reserves

Banks' reserves that are greater than the minimum regulatory requirement, not needed to fulfill lending demands.

Reserve Requirement

The reserve requirement is a central bank regulation that sets the minimum amount of reserves that must be held by a commercial bank.

Lend Out

The act of providing money or resources to another party with the expectation that the money or resources will be returned, often with interest.

Discount Rate

The interest rate used in discounted cash flow analysis to determine the present value of future cash flows.