When the Fed Uses an Interest Rate as an Intermediate

question 14

Multiple Choice

When the Fed uses an interest rate as an intermediate target, upward pressure on the interest rate is countered by increasing the supply of reserves. This may lead to

• A)higher fed funds rates.
• B)steady economic growth.
• C)a downward slide into recession.
• D)higher inflation in the future.

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Definitions:

Common Stock

A type of security that represents ownership in a corporation, giving holders voting rights and a share in the company's profits via dividends.

Dividends

Earnings distributed to a company's shareholders, commonly as a profit disbursement.

Fees Earned

Income received for services provided, often used in professional and consulting business models.

Supplies

Items used in the operation of a business, often consumable, like stationery, raw materials, or maintenance supplies.