Due to the huge inflow of money to Spain, price levels have begun to increase. The government worries that this huge money supply will be an economic problem soon. Which of these monetary policies will work to solve this problem? a. Increase cash reserve ratio, increase interest rates and buy government bonds b. Decrease cash reserve ratio, decrease interest rates and sell government bonds c. Decrease cash reserve ratio, increase interest rates and sell government bonds d. Increase cash reserve ratio, increase interest rates and sell government bonds
Due to the huge inflow of money to Spain, price levels have begun to increase. The government worries that this huge money supply will be an economic problem soon. Which of these monetary policies will work to solve this problem? a. Increase cash reserve ratio, increase interest rates and buy government bonds b. Decrease cash reserve ratio, decrease interest rates and sell government bonds c. Decrease cash reserve ratio, increase interest rates and sell government bonds d. Increase cash reserve ratio, increase interest rates and sell government bonds
Chapter13: The Federal Reserve System
Section: Chapter Questions
Problem 3QP
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Question
Due to the huge inflow of money to Spain, price levels have begun to increase. The government worries that this huge money supply will be an economic problem soon. Which of these monetary policies will work to solve this problem?
a.
Increase cash reserve ratio, increase interest rates and buy government bonds
b.
Decrease cash reserve ratio, decrease interest rates and sell government bonds
c.
Decrease cash reserve ratio, increase interest rates and sell government bonds
d.
Increase cash reserve ratio, increase interest rates and sell government bonds
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