If Assets Are Imperfect Substitutes, Then an Increase in the Amount

question 22

Multiple Choice

If assets are imperfect substitutes, then an increase in the amount of domestic currency bonds held by the public will ________ the risk premium and ________ the amount of domestic currency bonds held by the central bank.

• A) increase; leave unchanged
• B) increase; decrease
• C) increase; increase
• D) decrease; decrease
• E) leave unchanged; decrease

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Definitions:

Net Operating Income

A measure of a company's profitability from its regular, core business operations, excluding deductions of interest and taxes.

Average Operating Assets

The average value of a company's assets used in day-to-day operations over a specific period, used in calculating rates of return.

Sales

The total amount of goods or services sold by a company within a certain period of time.