Which of the Following Factors Can Contribute to a Reduction

question 84

Multiple Choice

Which of the following factors can contribute to a reduction in the money supply?

• A) bank purchases of Treasury bonds from the Fed
• B) bank sales of government bonds to meet liquidity demands
• C) banks expanding the approval and granting of loans
• D) a decrease in the required reserve ratio

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Definitions:

Interest Rate Parity

A financial theory stating that the difference in interest rates between two countries will be offset by changes in the exchange rate between their currencies.

Covered Interest Arbitrage

The practice of exploiting the interest rate differential between two countries while hedging against exchange rate risk using forward contracts.

Portfolio's Beta

A measurement that indicates the volatility, or systematic risk, of a portfolio relative to the overall market.

S&P500 Value

The numerical value representing the collective performance of the 500 largest companies listed on stock exchanges in the United States, as measured by the Standard & Poor's index.