Monetary Policy Application - Stephanie Foy | Laabri

1

Assume that the Consumer Price Index is rising too rapidly. Which of the following actions could the Federal Open Market Committee take to combat the inflation?

Sell bonds/securities

Lower the discount rate

Raise taxes

Lower the reserve requirement

SSEMA2.e

1

Raise the discount rate

Increase government spending

Lower interest on reserves

Sell bonds

SSEMA2.e

1

The money supply and aggregate demand would decrease. Real GDP would increase.

The money supply would increase. Aggregate demand and Real GDP would increase.

The money supply would decrease. Aggregate demand and Real GDP would decrease.

The money supply and aggregate demand would increase. Real GDP would decrease.

SSEMA2.e

1

Open Market Operations

Interest on Reserves

Discount Rate

Required Reserve Ratio

SSEMA2.d

1

Lowering the discount rate.

Lowering the reserve requirements for banks.

Reducing government spending.

Selling securities (bonds) on the open market.

Raising income taxes.

Raising interest on reserves.

SSEMA2.e