If the Federal Reserve wanted to expand the money supply in order to increase output, it should
a. sell government bonds, which will increase the money supply; this will cause interest rates to fall and aggregate demand to rise.
b. buy government bonds, which will increase the money supply; this will cause interest rates to fall and aggregate demand to rise.
c. increase the discount rate, which will raise the market rate of interest; this will cause both costs and prices to rise.
d. decrease taxes, which will reduce costs and cause prices to fall.
B
You might also like to view...
If the interest rate on a bank deposit in the United States is 3 percent while a similar deposit earns 6 percent in Britain, then we could expect that deposits would flow to
A) Britain if the pound is expected to depreciate more than 3 percent. B) the United States regardless of exchange rate expectations. C) the United States if the dollar is expected to appreciate less than 3 percent. D) Britain if the pound is expected to depreciate less than 3 percent. E) Britain regardless of exchange rate expectations.
The profit maximizing condition for a firm selling its output in a competitive market and buying its resources in a competitive market is
A) P = MC only. B) MRP = wage only. C) Both A and B. D) Neither A nor B.