Which of the Following Actions Should the Central Bank Take

question 48

Multiple Choice

Which of the following actions should the central bank take if monetary authorities want to reduce the supply of money to slow the rate of inflation?

• A) Sell government bonds, reducing money supply, increasing interest rates, and slowing aggregate demand.
• B) Buy government bonds, reducing money supply, increasing interest rates, and slowing aggregate demand.
• C) Decrease the discount rate, lowering interest rates and causing both costs and prices to fall.
• D) Increase taxes, reducing costs and causing prices to fall.

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Definitions:

Rotor Bars

Metal bars placed in the rotor of an induction motor that conduct current and interact with the magnetic field to create rotation.

Power Factor

A measure of how effectively electrical power is converted into useful work output, with a range from 0 to 1.

Reactance

The opposition that inductors and capacitors present to the flow of alternating current, characterized by its effect on the phase of the current.

Resistance

A material's opposition to the flow of electric current, measured in ohms.