Exhibit 15-6 -If the Federal Reserve Is Targeting the Interest Rate When

question 171

Multiple Choice

Exhibit 15-6
-If the Federal Reserve is targeting the interest rate when the demand for money increases,their proper response is to

• A)decrease the money supply
• B)keep the money supply constant
• C)increase the money supply
• D)stimulate inflation to increase the demand for money
• E)stimulate a decrease in the price level to increase the demand for money

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Definitions:

Yield

The return in terms of income from an investment, like dividends or interest earned by possessing a specific security.

Compound-interest

Interest computed on both the original sum invested or loaned, as well as on the interest that has been added to this principal amount over earlier periods.

GIC

A Guaranteed Investment Certificate, a Canadian investment that offers a guaranteed rate of return over a fixed period.

Investment

The allocation of resources, such as time, money, or effort, in hope of generating a future benefit or profit.