If the Federal Open Market Committee Conducts an Open Market

question 198

Multiple Choice

If the Federal Open Market Committee conducts an open market purchase:

• A)interest rates will fall.
• B)interest rates will remain unchanged.
• C)interest rates will rise.
• D)the money supply will decrease.

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Definitions:

Interest Rates

The cost of borrowing money, typically expressed as a percentage of the amount borrowed, paid to lenders over a specified period.

Government Failure

Occurs when government intervention in the economy causes an inefficient allocation of resources and leads to a net loss of economic welfare.

Special-interest Effect

The impact of a small, organized group on political or economic decisions, often in a way that benefits the group at the expense of the general public.

Positive Externalities

Benefits experienced by third parties due to the actions of others, for which the third party does not pay.