Which of the Following Will the Federal Reserve Do in Order

question 135

Multiple Choice

Which of the following will the Federal Reserve do in order to increase the money supply?

• A) sell government bonds
• B) buy corporate bonds
• C) sell common stock
• D) buy government bonds
• E) increase the salaries of its governors

---

Definitions:

Inelastic Demand

A situation where the demand for a product does not significantly change with a change in its price.

Excise Tax

A tax levied on the sale of particular goods and services, such as alcohol, tobacco, and gasoline.

Pretax Equilibrium

The market condition where supply and demand balance before any taxes are applied.

Tax Incidence

The analysis of the effect of a particular tax on the distribution of economic welfare, including which group - consumers or producers - ultimately bears the cost of the tax.