If the Fed Wants to Decrease the Amount of Deposits

question 17

Multiple Choice

If the Fed wants to decrease the amount of deposits that banks hold,it can

• A)buy government bonds in an open market operation.
• B)sell government bonds in an open market operation.
• C)force banks by decree to do so.
• D)sell domestic deposits to foreign investors.
• E)None of these

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Definitions:

Excise Tax

A form of taxation applied on certain goods, services, or activities, often included in the price of products like gasoline, alcohol, and tobacco.

Incidence

The measurement or frequency of occurrence, often used in the context of the distribution of a tax burden.

Federal Tax System

The mechanism by which the United States government collects taxes from individuals and businesses to fund public services and infrastructure.

Progressive

In economics, refers to taxation or policies that proportionally take more from those who have more income or wealth.