In Response to the Sharp Decline in Stock Prices in October

question 52

Multiple Choice

In response to the sharp decline in stock prices in October 1987,the Federal Reserve

• A)increased the money supply and increased interest rates.
• B)increased the money supply and decreased interest rates.
• C)decreased the money supply and increased interest rates.
• D)decreased the money supply and decreased interest rates.

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Definitions:

Interest

The cost of borrowing money or the return earned on an investment, typically expressed as an annual percentage of the principal.

Principal

The original sum of money borrowed in a loan, or the amount of the loan that has not yet been repaid, excluding interest.

Straight-Line Method

A depreciation technique that allocates an equal portion of an asset's cost to each period of its useful life.

Interest Expense

The cost incurred by an entity for borrowed funds, represented as a charge against earnings in the income statement.