An Example of a Tool Used by the Fed That

question 158

Multiple Choice

An example of a tool used by the Fed that decreases the money supply is:

• A) the Fed selling government bonds in the open market.
• B) a decrease in the federal funds rate.
• C) a decrease in the required reserve ratio.
• D) a decrease in the discount rate.

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Definitions:

Indirect Method

A way of calculating cash flows from operating activities in the statement of cash flows, where net income is adjusted for changes in balance sheet items that affect cash.

Depreciation Expense

Depreciation expense is the allocated amount of the cost of a tangible or physical asset that is expensed over its useful life, reflecting wear and tear or obsolescence.

Gain On Sale

The profit realized when an asset is sold for more than its book value.

Indirect Method

A way of presenting the cash flow statement that adjusts net income for changes in balance sheet accounts to calculate cash flow from operating activities.