If there is a sudden increase in government spending, which of the following should the Fed do if it wants to keep the price level steady?
a. Do nothing, since the self-correcting mechanism will adjust the economy
b. Sell bonds in the open market
c. Wait, since the price level usually does not change when government spending increases
d. Decrease the required reserve ratio
e. Buy bonds in the open market
B
You might also like to view...
A producer is said to have an absolute advantage in the production of a good when:
A) the producer can produce more units of the good per hour than another producer. B) the producer has a lower opportunity cost than another producer. C) the producer has a higher opportunity cost than another producer. D) the producer can sell the good at a higher price than another producer.
Which of the following directs the buying and selling of U.S. government securities?
a. Board of Governors b. District Federal Reserve Banks c. Federal Open Market Committee d. Federal Advisory Council e. member banks