The Fed Uses Three Policy Tools to Manipulate the Money

question 2

Multiple Choice

The Fed uses three policy tools to manipulate the money supply: ________,which affect reserves and the monetary base; changes in ________,which affect the monetary base; and changes in ________,which affect the money multiplier.

• A)open market operations; borrowed reserves; margin requirements
• B)open market operations; borrowed reserves; reserve requirements
• C)borrowed reserves; open market operations; margin requirements
• D)borrowed reserves; open market operations; reserve requirements

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Definitions:

Law of Total Probability

A fundamental rule that provides a way to break down the probabilities of complex events into more manageable pieces.

Mutually Exclusive

Events that cannot occur at the same time, meaning the occurrence of one event makes it impossible for the other event to occur.

Exhaustive

Pertaining to a comprehensive or complete method or approach that leaves no aspect unexplored or unaddressed.

Independent Events

Two or more events where the occurrence or outcome of one event does not affect the occurrence or outcome of another.