If the Fed Initiates a Program to Purchase Long-Term Treasury

question 3

Multiple Choice

If the Fed initiates a program to purchase long-term Treasury securities, it is most likely attempting to

• A)reduce the rate on short-term Treasury securities.
• B)reduce the rate on commercial paper.
• C)reduce inflation.
• D)reduce long-term interest rates.

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Definitions:

Economic Expansion

A period characterized by increased business activity and growth in the economy's overall output.

Aggregate Demand

The cumulative request for every type of good and service within an economy across different pricing points, throughout a particular timeframe.

Required Rate

The minimum return that investors expect to receive for investing in a particular asset, taking into account its risk.

Expected Growth Rate

The anticipated rate at which a company, asset, or investment is expected to grow over a certain period.