In the 1970s, in Response to Recessions Caused by an Increase

question 124

Multiple Choice

In the 1970s, in response to recessions caused by an increase in the price of oil, the central banks in many countries increased the money supply. How might the central banks have done this?

• A) by selling bonds on the open market, which would have raised the value of money
• B) by purchasing bonds on the open market, which would have raised the value of money
• C) by selling bonds on the open market, which would have lowered the value of money
• D) by purchasing bonds on the open market, which would have lowered the value of money

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Definitions:

Equilibrium Output

The level of output at which the quantity supplied equals the quantity demanded, leading to a stable market condition without surplus or shortage.

Purely Competitive Market

A theoretical market structure characterized by an infinate number of buyers and sellers, homogeneous products, and no barriers to entry or exit.

Consumer Surplus

The distinction between what consumers are willing and able to allocate financially for a good or service, and what they actually allocate.

Purely Competitive Market

A purely competitive market is characterized by many buyers and sellers, homogenous products, and no barriers to entry or exit, leading to price taking behavior by individuals.