If the Demand for Money Increases and the Fed Wants

question 158

Multiple Choice

If the demand for money increases and the Fed wants interest rates to remain unchanged,which of the following would be appropriate policy?

• A) Recall Federal Reserve Notes from circulation.
• B) Raise the legal reserve requirement.
• C) Buy bonds in the open market.
• D) Raise the discount rate.

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Definitions:

Confounding Variable

An outside influence that changes the effect of a dependent and independent variable being examined in an experimental study, potentially skewing results.

Problems

Issues, obstacles, or challenges that need to be dealt with or overcome.

Study

The act of dedicating time and attention to gaining knowledge on a subject through reading, practice, or observation.

Correlations

statistical measures that describe the extent to which two or more variables fluctuate together, indicating a relationship between them but not causation.