In Order to Increase Its Target for the Federal Funds

question 50

Multiple Choice

In order to increase its target for the federal funds rate, the Fed would normally

• A)conduct open market sales
• B)conduct open market purchases
• C)increase the discount rate
• D)increase reserve requirements

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Definitions:

Price-taker Market

A market situation where buyers and sellers accept the prevailing market price as they individually have no influence over it.

Short-run Market Supply

The total quantity of a good that producers are willing and able to sell at a given price over a short period.

Marginal Cost Curves

graphical representations that show how the cost of producing one additional unit of a good or service varies with the quantity produced.

Price Taker

A price taker is a firm or individual who has no power to influence the prices in a market, taking the prevailing prices as given.