The Fed Influences the Interest Rate by Using Which of the Following

question 207

Multiple Choice

The Fed influences the interest rate by using which of the following tools?
I.open market operations
Ii.taxes on bank accounts
Iii.changes in required reserve ratios

• A)i only
• B)ii only
• C)iii only
• D)Both i and iii
• E)i,ii and iii

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Definitions:

Elasticity

A measure of how much the demand or supply of a product or service changes in response to a price or income change.

Hedge Ratio

The proportion of a position or investment that is hedged, aiming to reduce risk exposure.

Hedge Ratio

The ratio that compares the value of the position protected via a hedge to the size of the entire position itself.

Dollar Change

The difference in an asset's price when compared to a previous price, often used to quantify gains or losses in securities.