If the Fed Desired to Reduce the Federal Funds Rate

question 33

Multiple Choice

If the Fed desired to reduce the federal funds rate,

• A)it would conduct an open market sale, reducing reserve supply.
• B)it would conduct an open market purchase, increasing reserve supply.
• C)it would conduct an open market sale, increasing reserve demand.
• D)it would conduct an open market purchase, reducing reserve demand.

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Definitions:

Direct Method

A approach to cash flow statement preparation where actual cash receipts and payments are reported, instead of adjusting net income.

Operating Expenses

Costs associated with the day-to-day operations of a business, such as rent, utilities, and salaries.

Prepaid Expenses

Expenses paid in advance for goods or services to be received in the future.

Accrued Liabilities

Liabilities recorded on a company’s balance sheet for expenses that have been incurred but not yet paid.