If the Fed Wanted to Put Downward Pressure on the FFR

question 8

Multiple Choice

If the Fed wanted to put downward pressure on the FFR, it would likely:

• A) sell government bonds to banks.
• B) purchase government bonds from banks.
• C) increase the reserve requirement.
• D) increase the discount rate.
• E) make a request to Congress to reduce government spending.

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Definitions:

Discounting

A financial process of determining the present value of a payment or a series of payments that will be made in the future.

Savings Account

A deposit account held at a financial institution that provides principal security and a modest interest rate.

Down Payment

An initial upfront portion of the total amount due, typically associated with the purchase of expensive items like cars or real estate.

Present Value Calculation

A financial process that determines the current worth of a future cash flow, stream of cash flows, or an investment, based on a specific discount rate.