If the Fed Sells Bonds, the Short-Run Impact of This

question 96

Multiple Choice

If the Fed sells bonds, the short-run impact of this policy will tend to include:

• A)an increase in the inflation rate.
• B)a reduction in unemployment
• C)an increase in real output
• D)an increase in real interest rates.
• E)a decrease in real interest rates

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Definitions:

Equilibrium Interest Rate

The interest rate at which the quantity of funds demanded equals the quantity of funds supplied.

Price Level

The average of the current prices of goods and services produced in the economy, often used as a measure to track inflation or deflation.

Money Supply

The collective sum of all monetary resources in an economy, including cash, coins, and savings and checking account balances, at a particular time.

Interest Rates

The expense associated with taking out a loan or the profit from an investment, presented as a percentage of the initial amount.