If the Fed Carries Out an Open Market Operation and Sells

question 64

Multiple Choice

If the Fed carries out an open market operation and sells U.S. government securities, as long as the federal funds interest rate remains within the corridor the federal funds rate ________ and the quantity of reserves ________.

• A) falls; increases
• B) rises; increases
• C) falls; decreases
• D) rises; decreases

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Definitions:

Section 1231 Property

Refers to a type of property, both tangible and depreciable, used in a business and held for more than one year, which qualifies for tax treatment that combines aspects of capital gains and ordinary income tax rates.

Trade or Business

Activity conducted for the purpose of earning income or profit, involving regular and continuous activities in a particular field.

Deemed Worthless

A term referring to assets that have become valueless and are recognized as a loss for tax purposes.

Long-Term Loss

A loss realized from the sale of an asset held for more than one year, which can offset long-term capital gains.