If Indicators Like Weak Demand and Falling Commodity Prices Caused

question 60

Multiple Choice

If indicators like weak demand and falling commodity prices caused concern about deflation (falling prices) , what could the Fed do to head off the deflationary threat?

• A) increase the reserve requirements imposed on banks
• B) buy bonds in order to expand the money supply
• C) increase the discount rate
• D) increase the national debt

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Definitions:

Time Value

Time value relates to the concept that money available at the present time is worth more than the same amount in the future due to its potential earning capacity.

Voting Stock

Shares that give the shareholder the right to vote on corporate matters, such as electing directors and approving company policies.

Book Value

The value of an asset according to its balance sheet account balance, taking into account the cost of the asset minus depreciation.

Fair Value

The estimated market price of an asset or liability in an orderly transaction between market participants at the measurement date.