An Example of a Federal Reserve Action That Decreases the Money

question 128

Multiple Choice

An example of a Federal Reserve action that decreases the money supply is:

• A) a reduction in the taxes banks pay on their profits.
• B) a decrease in the discount rate.
• C) the Fed buying government bonds in the open market.
• D) an increase in the required reserve ratio.

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Definitions:

Net Present Value

The economic distinction based on the present valuation of incoming versus outgoing cash flows during a fixed period.

Profitability Ratio

A class of financial metrics used to evaluate a business's ability to generate earnings as compared to its expenses and other relevant costs incurred during a specific period of time.

Average Accounting Return

A financial ratio that measures the average net income a company expects to earn from an investment compared to its initial cost.

Book Value

The net value of a company's assets as recorded on the balance sheet, calculated by subtracting liabilities from the total value of assets.