If the Fed Carries Out an Open Market Operation to Buy

question 153

Multiple Choice

If the Fed carries out an open market operation to buy U.S. government securities, the federal funds rate ___________and the quantity of reserves___________ .

• A) rises; increases
• B) falls; increases
• C) falls; decreases
• D) rises; decreases

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Definitions:

Present Value

Today's value of a future money amount or sequence of cash flows, determined by a certain rate of return.

Initial Investment

The initial amount of money invested in a project or venture.

Financial Break-Even

The point at which total revenues equal total costs and expenses, leaving no net gain or loss.

Accounting Basis

Refers to the method under which income and expenses are recognized and reported. The two primary methods are cash basis and accrual basis accounting.