From September 2007 to April 2008, the Fed Lowered the Federal

question 315

Multiple Choice

From September 2007 to April 2008, the Fed lowered the federal funds rate from 5.25 percent to 2 percent in a series of steps. The Fed's actions were largely in response to

• A) threats to the financial system from the mortgage default crisis.
• B) forecasts of higher inflation rates.
• C) Chinese refusal to allow their exchange rate to reflect market conditions.
• D) pressure from the president to offset contractionary effects of a tax increase.

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Definitions:

Equipment

Tangible property used in operations, such as machinery and computers, which has a useful life longer than one accounting period and is used in the production of goods and services.

Annual Depreciation

The gradual reduction in the recorded value of a fixed asset, representing its wear and tear, obsolescence, or other declines in value over time.

Book Value

The net value of a company's assets, as recorded on the balance sheet, minus its liabilities and intangible assets.

Financial Statements

Documents that present the financial activities and conditions of a business or entity, including the balance sheet, income statement, and cash flow statement.