If the Fed Wanted to Expand the Money Supply as Part

question 181

Multiple Choice

If the Fed wanted to expand the money supply as part of an antirecession strategy, it could

• A) increase the reserve requirements imposed on commercial banks.
• B) decrease the interest rate paid on excess reserves encouraging banks to extend more loans.
• C) sell U.S. government securities and other financial assets that it is currently holding.
• D) raise the interest rate on loans extended to banks and other financial institutions.

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Definitions:

Equity Securities

Financial instruments representing ownership interest in a company, such as stocks, which provide an equity stake to investors.

Equity Method

An accounting technique used to record investments in associate companies, recognizing the investor's share of the earnings as income.

Dividends

Payments made by a corporation to its shareholder members. It is the portion of corporate profits paid out to stockholders.

Investment

The action of deploying resources (such as capital) with the expectation of generating an income or profit.