The Table Above Shows the Net Effect of an Open

question 40

Multiple Choice

The table above shows the net effect of an open market operation undertaken by the Fed. Use it to answer the following question.

-The Fed has

• A) increased bank reserves, thereby decreasing the supply of money.
• B) sold government securities, thereby decreasing the supply of money.
• C) sold government securities, thereby increasing the supply of money.
• D) increased the national debt.
• E) purchased government securities, thereby increasing the supply of money.

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Definitions:

Discount Rate

This is the discount rate used to figure out what future cash flows are worth in the present in discounted cash flow analysis.

Small Used Aircraft

A previously owned aircraft that is smaller in size, often used for personal, business, or small commercial purposes.

Net Present Value

The difference between the present value of cash inflows and the present value of cash outflows over a period of time.

Discount Rate

Within discounted cash flow analysis, it's the interest rate applied to derive the present value of cash flows expected in the future.