The Fed Increases the Reserve Requirement,but It Wants to Offset

question 93

Multiple Choice

The Fed increases the reserve requirement,but it wants to offset the effects on the money supply.Which of the following should it do?

• A)sell bonds to increase reserves
• B)sell bonds to decrease reserves
• C)buy bonds to increase reserves
• D)buy bonds to decrease reserves

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Definitions:

Debt-Equity Ratio

A measure of a company's financial leverage, calculated by dividing its total liabilities by shareholders' equity.

Capital Projects

Large, long-term investments undertaken by a company or government to create, expand, or improve physical assets such as buildings, infrastructure, or equipment.

Total Assets

The sum of all assets owned by a company, including both current and non-current assets, as reported on the balance sheet.

Stock Repurchase

A company's buyback of its own shares from the marketplace, usually to increase the value of remaining shares by reducing supply.