In Comparing the Actions of the Fed in the Fall

question 71

Multiple Choice

In comparing the actions of the Fed in the fall of 1998 with its actions in the fall of 1991, we can say that

• A)in both instances the Fed moved quickly to raise interest rates in the face of an expected increase in inflation.
• B)in both instances the Fed moved quickly to cut interest rates in the face of signs of a credit crunch.
• C)the Fed moved more quickly in 1998 than in 1991 to cut interest rates in the face of signs of a credit crunch.
• D)the Fed failed in both cases to take action in the face of signs of a credit crunch.

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Definitions:

Effective Rate

A more accurate measure of interest or return that takes into account the effects of compounding over a specific period.

Contract Rate

The agreed-upon interest rate specified in a contract, often related to loans or financial agreements.

Bond Indenture

A legal contract specifying the terms and conditions under which bonds are issued, including details of interest payments and the maturity date.

Contract Rate

The agreed-upon interest rate specified in a contract, often relating to loans or bond issues.