Refer to Figure 26-10. In the figure above, suppose the economy is initially at point A. The movement of the economy to point B as shown in the graph illustrates the effect of which of the following policy actions by the Federal Reserve?
A) an open market purchase of Treasury bills B) a decrease in the required reserve ratio
C) an open market sale of Treasury bills D) an increase in income taxes
C
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When the percentage change in price is greater than the corresponding change in quantity demanded, demand is inelastic
Indicate whether the statement is true or false
If the Federal Reserve unexpectedly decides to sell bonds, which of the following will most likely happen in the short run?
a. The demand for loanable funds will increase, which will exert upward pressure on the interest rate. b. The supply of loanable funds will decrease, which will exert upward pressure on the interest rate. c. The supply of loanable funds will increase, which will exert downward pressure on the interest rate. d. The natural rate of unemployment will increase.