If the Federal Open Market Committee decides to expand the money supply, then it will
A. raise the discount rate to member banks.
B. issue directions to purchase government securities, thus putting more reserves in member banks.
C. issue directions to sell government securities, thus taking reserves from member banks.
D. order new Federal Reserve notes delivered to member banks.
Answer: B
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In the above figure, the economy is initially at point B. If the Fed increases the quantity of money, there is
A) a movement to point C. B) a movement to point A. C) a shift to AD2. D) a shift to AD1.
Last year the price of a dozen eggs was $1, and this year the price is $1.30. Which of the following does NOT express this price change accurately?
A) The price increased 30 percent. B) The price increased by 30 cents. C) If last year was the base year, the index number for this year would be 130. D) If this year is the base year, the index number for last year would be 130.