Which of the Following Describes How the Federal Reserve Could

question 46

Multiple Choice

Which of the following describes how the Federal Reserve could use tools of monetary policy to decrease the money supply?

• A) Increase the reserve requirement, increase the discount rate, and sell bonds.
• B) Increase the interest rate that the Federal Reserve pays on bank deposits, increase the discount rate, and buy bonds.
• C) Decrease the reserve requirement, increase the discount rate, and sell bonds.
• D) Decrease the reserve requirement, decrease the discount rate, and decrease the interest rate that the Fed pays on bank deposits.

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Definitions:

Target Profit

The desired amount of net income a company aims to achieve for a certain period as part of its financial and strategic planning.

Monthly Fixed Expense

Costs that do not vary with the level of production or sales in a given period, such as rent or salaries, accruing on a monthly basis.

Margin Of Safety

The difference between actual or projected sales and the break-even point, indicating the buffer against losses.

Break-Even Sales

The amount of revenue that is exactly sufficient to cover both fixed and variable costs, resulting in neither profit nor loss.