If the Fed Acts to Decrease the Money Supply

question 141

Multiple Choice

If the Fed acts to decrease the money supply,

• A) it will increase the supply of bonds, drive bond prices up, and drive interest rates down.
• B) it will increase the demand for bonds, drive bond prices down, and drive interest rates down.
• C) it will increase the supply of bonds, drive bond prices down, and drive interest rates up.
• D) it will increase the demand for bonds, drive bond prices up, and drive interest rates down.

---

Definitions:

Combined Book Value

The total value of a company's assets as recorded in its financial books, excluding intangible items and liabilities.

Partial Equity Method

An accounting technique used for investments, where the investment is recorded at cost and adjusted for the investor's share of the investee's income, losses, and dividends.

Excess Consideration

The amount paid over the fair value of net assets during an acquisition, often recorded as goodwill on the balance sheet.

Equipment Undervalued

A situation in which the book value of equipment is recorded at less than its fair market value.