If the Fed Is Targeting Interest Rates and Money Demand

question 14

Multiple Choice

If the Fed is targeting interest rates and money demand increases, an appropriate policy response would be to

• A) increase reserve requirements.
• B) increase the discount rate.
• C) buy U.S. Treasury securities from government bond dealers.
• D) increase government spending.
• E) none of the above.

---

Definitions:

Strong Base

A substance that can readily accept hydrogen ions and is completely or nearly completely dissociated in aqueous solution, resulting in a high pH.

Sudan IV

A lysochrome (fat-soluble dye) used in histology to stain lipids, triglycerides, and lipoproteins in cells and tissues.

Colorimetric PH Indicator

A chemical compound that changes color in response to changes in pH, used to determine the acidity or alkalinity of a solution.

Neutral Substance

A chemical compound that is neither acidic nor basic in nature, often having a pH level of around 7.