If the Fed Was Trying to Reduce Demand-Pull Inflation, It

question 114

Multiple Choice

If the Fed was trying to reduce demand-pull inflation, it might:

• A)​sell government securities, lower reserve requirements and lower the discount rate.
• B)​sell government securities, raise reserve requirements and raise the discount rate.
• C)​sell government securities, lower reserve requirements and raise the discount rate.
• D)​buy government securities, lower reserve requirements and raise the discount rate.

---

Definitions:

Disposable Income

The amount of money that households have available for spending and saving after income taxes have been taken out.

Consumption Spending

Expenditures by households on goods and services, excluding purchases of new housing, and a major component of GDP.

Consumption Function

A representation in economics indicating the relationship between total consumer expenditures and household income levels.

Interest Rate

The cost of borrowing money or the return on savings, expressed as a percentage, influencing economic activity by affecting spending and investment decisions.