As the rate of interest on borrowed funds increases, the quantity of investment funds demanded diminishes

When the Fed purchases government bonds it _____ reserves and ____ the money supply.

A) decreases; increases B) increases; decreases C) decreases; decreases D) increases; increases

Steel producers in the United States observe that foreign sales of U.S. steel has drastically declined due to stringent trade policies adopted by the foreign governments and unfair treatment of U.S. steel exports in foreign countries. The lobbying efforts of such loss making U.S. steel manufacturers induce the domestic government to restrict the entry of imported steel and help stimulate the

sales of domestically produced steel. Which of the following tariffs is most similar to the example mentioned above? a. A tariff imposed by the government to stimulate domestic production of a high-technology good with positive spillover effects b. A tariff imposed by the government on the import of cotton textiles because it is an infant industry in the domestic country c. An import tariff applied against a foreign monopoly supplying the domestic market d. Tariffs imposed by the government on an import competing industry that generates a negative production externality e. Reciprocal tariffs introduced by the government of a country as a call for fair trade