When the Fed Wants to Decrease the Money Supply, It

question 133

Multiple Choice

When the Fed wants to decrease the money supply, it will

• A) buy bonds.
• B) lower the federal funds rate.
• C) sell bonds.
• D) lower taxes.

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Definitions:

Cross Elasticity

A measure in economics that shows how the quantity demanded for one good responds to a change in the price of another good.

Quantity Demanded

The total amount of a good or service consumers are willing and able to purchase at a specific price point, during a certain time frame.

Price Change

A variation in the cost of a good or service, which can occur due to various factors like supply and demand or inflation.

Price Elasticity

A measure of how much the quantity demanded of a good responds to a change in the price of that good, indicating the sensitivity of consumers to price changes.