In the 1970s, in Response to Recessions Caused by an Increase

question 192

Multiple Choice

In the 1970s, in response to recessions caused by an increase in the price of oil, the central banks in many countries increased their money supplies. The central banks might have done this by

• A)selling bonds on the open market, which would have raised the value of money.
• B)purchasing bonds on the open market, which would have raised the value of money.
• C)Selling bonds on the open market, which would have raised the value of money.
• D)purchasing bonds on the open market, which would have lowered the value of money.

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Definitions:

Inflation

A sustained increase in the general price level of goods and services in an economy over a period of time, leading to a decrease in the purchasing power of money.

Fed Tightened

Refers to the Federal Reserve's actions to reduce the money supply and raise interest rates to control inflation.

Monetary Policy

The actions of a central bank, currency board, or other regulatory committees that determine the size and rate of growth of the money supply, which in turn affects interest rates.

Inflation

An increase in the general price level of goods and services in an economy over a period of time, leading to a decrease in the purchasing power of money.