In the Context of Monetary Policy, If the Fed Decreases

question 147

Multiple Choice

In the context of monetary policy, if the Fed decreases the reserve requirement, _____.

• A) there will be more loans available
• B) the availability of credit will decrease
• C) banks will need to hold more funds
• D) interest rates will increase

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Definitions:

Holding-Period Return

The total return received from holding an asset or portfolio of assets over a period of time, considering both price appreciation and dividends/interest.

Bond

A security issued by a borrower that obligates the issuer to make specified payments to the holder over a specific period. A coupon bond obligates the issuer to make interest payments called coupon payments over the life of the bond, then to repay the face value at maturity.

Standard Deviation

A statistical measure of the dispersion or spread of a set of data points or investment returns around their mean.

Expected Return

The predicted amount of profit or loss an investment is expected to generate over a specific time period.