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

question 34

Multiple Choice

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

• A)increase.
• B)decrease.
• C)not change.
• D)increase,then decrease.

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Definitions:

Domestic Investment

Domestic investment is the spending on capital equipment, inventories, and structures within a country by its residents and businesses.

Trade Deficits

A situation where a country's imports of goods and services exceed its exports.

Domestic Investment

The total amount of money that is invested within a country's borders by both the public and private sectors.

U.S. Saving

The portion of disposable income that is not spent on consumption of goods and services in the United States, but set aside for future use.