Rather Than Using the Purchase and Sale of Only Government

question 17

Multiple Choice

Rather than using the purchase and sale of only government bonds in the conduct of open market operations,in 2008 the Fed also began buying and selling

• A)stock options so it would be able to gain from the expected rebound in the stock market.
• B)real estate in the Washington D.C.area.
• C)corporate bonds,commercial paper,and mortgage-backed securities from commercial banks and other financial institutions.
• D)future contracts for goods like grains,metals,and crude oil,which could be expected to increase in price substantially if the inflation rate rose rapidly in the future.

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Definitions:

Significant Noncash Transactions

Financial activities that do not involve cash flows but significantly affect the financial position of a company.

Treasury Stock Acquisition

The purchase of a company's own shares from the marketplace, reducing the amount of outstanding stock.

Bond Issuance

The process of selling bonds to investors in order to raise capital.

Investing Activities

Financial actions that involve the purchase or sale of long-term assets and other investments not considered cash equivalents.