If the Fed Acts to Increase the Money Supply

question 154

Multiple Choice

If the Fed acts to increase the money supply,

• A) it will sell bonds, drive bond prices up, and drive interest rates down.
• B) it will buy bonds, drive bond prices down, and drive interest rates down.
• C) it will sell bonds, drive bond prices up, and drive interest rates up.
• D) it will buy bonds, drive bond prices up, and drive interest rates down.

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Definitions:

Declaration Date

The date on which a company's board of directors announces the issuance of a dividend to its shareholders.

Cash Dividend

A distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.

Stockholders' Equity

The residual interest in the assets of a corporation that remains after deducting liabilities, representing the ownership interest of shareholders.

Preferred Dividends

Dividends that are paid to preferred shareholders before any dividends are paid to common shareholders.