What Are the Basic Functions of Financial Futures and Forward

question 76

Multiple Choice

What are the basic functions of financial futures and forward markets?

• A)reduction of risk associated with price changes that occurred in the past
• B)speculation in hopes of profiting from past price changes and mistakes that were made
• C)elimination of future price changes
• D)reduction of risk associated with future price changes and speculation in hopes of profiting from future price changes

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Definitions:

M1 Money Supply

The total money supply that includes cash and liquid assets that are easily convertible into cash, such as demand deposits.

Monetary Policy

Actions undertaken by a central bank, such as the Federal Reserve, to control the money supply and interest rates to achieve macroeconomic objectives like controlling inflation, consumption, growth, and liquidity.

Federal Open Market Committee

The branch of the Federal Reserve System responsible for setting national monetary policy and interest rates.

Reserve Requirement

The minimum amount of deposits that a bank must hold in reserve and not lend out, which is set by the central bank as a means to control the money supply.