The Fed is most likely to pursue
A. Numerous increases in the discount rate to tighten the money supply quickly.
B. Frequent changes in marginal tax rates.
C. Frequent adjustment of the reserve requirement.
D. Use of open market operations as the primary mechanism to change reserves.
Answer: D
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Steve owns a motorcycle valued at $5,000 and that is his only asset. There is a 5 percent chance that Steve will have an accident within a year. If he does have an accident, his motorcycle is worthless
Steve's utility of wealth curve is shown in the figure above. An insurance company agrees to pay Steve the full value of his motorcycle in case of an accident if he buys the company's insurance policy. The company's operating expenses are $500 per policy. What is the minimum premium that the insurance company will accept? A) $1,000 B) $2,000 C) $500 D) $1,500
Define the terms recessionary gap and inflationary gap. Why do they occur?
What will be an ideal response?