Which of the Following Policy Actions by the Federal Reserve

question 113

Multiple Choice

Which of the following policy actions by the Federal Reserve is likely to increase the money supply?

• A)Sell government bonds, decrease reserve requirements, decrease the discount rate.
• B)Sell government bonds, increase reserve requirements, increase the discount rate.
• C)Buy government bonds, increase reserve requirements, decrease the discount rate.
• D)Buy government bonds, decrease reserve requirements, decrease the discount rate.

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Definitions:

Replacement Stock

Stock issued in exchange for an existing stock, often used in stock splits, mergers, or acquisitions to adjust shareholder holdings without changing overall equity.

Expected Return

The weighted average of all possible returns for an investment, where each outcome is weighted by its likelihood of occurrence.

Standard Deviation

A measure of the dispersion or variability of a set of data points from their mean; used in finance to gauge the volatility of an investment.

Market Risk Premium

The market risk premium is the additional return an investor expects to receive from holding a risky market portfolio instead of risk-free assets.