Bank Lending and Deposits Tend to Change as Interest Rates

question 140

Multiple Choice

Bank lending and deposits tend to change as interest rates change.Can the Fed counteract this tendency?

• A)Yes, through its ability to affect the money supply.
• B)Yes, through its ability to change tax levels.
• C)No, the Fed is forbidden by the Constitution from intervening in the economy.
• D)No, the Fed almost always follows a passive monetary policy.

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Definitions:

Investing Activities

Investing activities are financial transactions related to the acquisition or sale of long-term assets or investments not related to the core business operations.

Financing Activities

Transactions and events affecting the equity and debt of the company, usually related to borrowing, repaying, and issuing equity.

Noncash Investing

Investment activities that do not involve the immediate outlay of cash, such as the exchange of one asset for another.

Financing Activities

Transactions and events that affect the long-term liabilities and equity of a company, including issuing shares, borrowing money, and repaying debt.