In Its Reaction to Financial Crises in October 1987 and August

question 70

Multiple Choice

In its reaction to financial crises in October 1987 and August 1998,the Fed

• A) did nothing, allowing natural market forces to correct the conditions.
• B) decreased the money supply while promoting an increase in demand to strengthen prices.
• C) created and expanded the duties of the Long-Term Capital Management Corporation to oversee foreign lending.
• D) ensured that adequate liquidity was available to minimize the real impact of these shocks.
• E) raised interest rates to encourage more people to save rather than speculate with their money.

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Definitions:

Cost Of Installment Goods Sold

The cost assigned to goods that have been sold on installment, including both the cost of manufacturing and a portion of interest on the installment sales.

Installment Sales Revenue

Income recognized from sales made where payment is received in periodic installments, often used in financing transactions for high-ticket items.

Deferred Gross Profit-Year 1

This refers to the portion of gross profit on sales made in the first year that is not recognized immediately but is deferred to future periods under certain accounting methods.

Realized Gross Profit

The gross income that a company has earned and recognized from its sales or services, after accounting for the cost of goods sold, but before deducting operating expenses.