There Are Two Ways in Which the Fed Can Provide

question 6

Multiple Choice

There are two ways in which the Fed can provide additional reserves to the banking system: it can ________ government bonds or it can ________ discount loans to commercial banks.

• A)sell;extend
• B)sell;call in
• C)purchase;extend
• D)purchase;call in

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Definitions:

Trade Credit

The credit extended to a buyer by a supplier, allowing the buyer to purchase goods or services and pay for them at a later date.

Trade Creditors

Trade creditors refer to suppliers from whom a business has purchased goods or services on credit, payable within a short period, typically less than one year.

Credit Checks

A review of an individual's or company's financial history, often performed by a lender or financial institution, to assess the risk of lending money or extending credit.

Interest-bearing Asset

A type of investment that earns interest over time, such as savings accounts, certificates of deposit, and bonds.