If the Fed Sells U

question 147

Multiple Choice

If the Fed sells U.S.government securities to drain reserves from banks,which of the following will probably occur?

• A)The demand for money will increase and the interest rate will rise.
• B)The money supply will increase and the interest rate will fall.
• C)The interest rate will rise and the quantity of money demanded will fall.
• D)The money supply will decrease and the interest rate will fall.
• E)The interest rate will fall and the quantity of money demanded will increase.

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Definitions:

Competitive Market

A market structure characterized by a large number of buyers and sellers, free entry and exit, and products that are similar across suppliers, ensuring no single entity can control prices.

Entry Barriers

Obstacles that make it difficult for new competitors to enter an industry or market.

Regulatory Standards

Specifications and guidelines established by authorities designed to ensure products, services, and actions meet required safety, quality, and performance criteria.

Competitive Price-searcher Market

A market structure where firms set their own prices because products are differentiated, giving them some degree of pricing power.