If There Is No Discount Lending and the Fed Uses

question 11

Multiple Choice

If there is no discount lending and the Fed uses open market operations to lower the equilibrium federal funds rate, the _____ of reserves shifts to the

• A) demand, right.
• B) demand, left.
• C) supply, right.
• D) supply, left.

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Definitions:

Low-Dividend Clientele

Investors who prefer companies that offer lower dividend payments because they are in lower income tax brackets or have different investment goals.

High-Dividend Clientele

A group of investors who prefer stocks that pay high dividends because they seek steady income from their investments.

Arbitrage Clientele

A group of investors who seek to profit from price differentials of the same asset in different markets, without risk.

Homemade Dividends

The concept that investors can create their own dividend policy by selling a portion of their portfolio of equities, instead of relying on the company's dividend payments.