If the Fed Has Fixed the Interest Rate

question 34

Multiple Choice

If the Fed has fixed the interest rate,

• A)it must conduct open market sales when money demand increases.
• B)the money demand will not change.
• C)money supply and money demand will not change.
• D)it must conduct open market sales when money demand decreases.
• E)the money supply will not change.

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Definitions:

Financing

The act of providing funds for business activities, making purchases or investing.

Debt

Money owed by one party to another, usually reflected as loans, bonds, or lines of credit that must be repaid with interest.

Cost Of Debt

The effective interest rate that a company pays on its total debt, serving as a measure of the expense of borrowing.

Yield To Maturity

The total return anticipated on a bond if it is held until the maturity date, considering all payments of interest and principal against the current market price.