Before the fiNancial Crisis of 2008, If the Fed Bought

question 339

Multiple Choice

Before the financial crisis of 2008, if the Fed bought government securities in the open market, it

• A) decreased the excess reserves of the banking system, reducing excess reserves for overnight loans in the Federal funds market, thus lowering the Federal funds rate.
• B) increased the excess reserves of the banking system, reducing excess reserves for overnight loans in the Federal funds market, thus lowering the Federal funds rate.
• C) decreased the excess reserves of the banking system, reducing excess reserves for overnight loans in the Federal funds market, thus increasing the Federal funds rate.
• D) increased the excess reserves of the banking system, raising excess reserves for overnight loans in the Federal funds market, thus lowering the Federal funds rate.

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Definitions:

Cost Volume Profit Graph

A graphical representation that displays the relationships between a company's costs, revenues, and profits over different levels of production and sales volumes.

CVP Graph

A visual representation of the Cost-Volume-Profit analysis, illustrating the relationships between an organization's costs, sales volume, and profit.

Operating Leverage

The extent to which a company uses fixed costs in its operations, affecting its potential for higher profits or losses with changes in sales volume.

Selling Price

The amount of money for which something is sold to a buyer, after considering production, marketing, and distribution costs.