If a Central Bank Wants to Reduce Interest Rates It

question 6

Multiple Choice

If a central bank wants to reduce interest rates it will instruct its traders to:

• A) instruct all financial institutions to adjust rates accordingly.
• B) reduce liquidity in financial markets.
• C) buy bonds on the open market.
• D) carry out open market operations by buying shares on the stock exchange.

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Definitions:

Insolvency

The financial state in which an individual or company cannot meet their due debt obligations due to a lack of sufficient assets or funds.

Leverage

The use of borrowed capital or financial derivatives to increase the potential return of an investment.

IPO

An Initial Public Offering (IPO) is the process by which a private company offers shares to the public in a new stock issuance, allowing it to raise capital from public investors.

Public Investors

Individuals or entities that invest their money in publicly traded securities, such as stocks and bonds, available on the open market.