The Value of Final Sales Tends to Be Less Volatile

question 48

Multiple Choice

The value of final sales tends to be less volatile than GDP because

• A) it excludes residential investment.
• B) it excludes inventory investment.
• C) it excludes nonresidential investment.
• D) it includes allowances for credit purchases of large consumer durables.
• E) all of the above.

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Definitions:

Discount Rates

Discount rates refer to the interest rate charged to commercial banks and other financial institutions for loans received from the central bank's discount window.

Federal Funds Rate

The interest rate banks and other depository institutions charge one another on overnight loans made out of their excess reserves.

Borrowed Reserves

Funds that commercial banks borrow from the central bank to meet reserve requirements, often indicative of a tight monetary policy.

Fed

The Federal Reserve System, which is the central bank of the United States responsible for monetary policy.