When the Federal Reserve Sells Assets from Its Portfolio to the Public

question 41

Multiple Choice

When the Federal Reserve sells assets from its portfolio to the public with the intent of changing the money supply,

• A)those assets are government bonds and the Fed's reason for selling them is to increase the money supply.
• B)those assets are government bonds and the Fed's reason for selling them is to decrease the money supply.
• C)those assets are items that are included in M2 and the Fed's reason for selling them is to increase the money supply.
• D)those assets are items that are included in M2 and the Fed's reason for selling them is to decrease the money supply.

---

Definitions:

Hyperinflation

A very high rate of inflation.

Deflation

A decrease in the general price level of goods and services in an economy over a period, often leading to increased purchasing power of the currency.

Inflation

The rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling.

Disinflation

A reduction in the rate of inflation