The Average Rate of Return Is a Measure of Profitability

question 121

True/False

The average rate of return is a measure of profitability computed by dividing the average annual cash inflows from an asset by the average amount invested in the asset.

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Definitions:

Open Market Purchases

Actions by a central bank to buy securities in the open market to increase the money supply and lower interest rates, aiming to stimulate economic activity.

Reserve Requirement

The minimum amount of reserves a bank is mandated to hold by central banking authorities, akin to the reserve ratio.

Reserve Ratio

A central bank regulation that sets the minimum fraction of customer deposits and notes that each commercial bank must hold as reserves rather than lending out.

Reserve Requirement

The portion of depositor's balances that banks must have on hand as cash or in deposits with the central bank, a tool used by central banks to control the money supply.