Which of the Following Statements Is Incorrect with Respect to the Federal

question 61

Multiple Choice

Which of the following statements is incorrect with respect to the federal funds market?

• A) It allows depository institutions to accommodate the short-term liquidity needs of other financial institutions.
• B) Federal funds purchased represent an asset to the borrowing bank and a liability to the lending bank that sells them.
• C) The federal funds market is typically most active on Wednesday, because that is the final day of each particular settlement period for which each bank must maintain a specified volume of reserves required by the Fed.
• D) All of the above are true with respect to the federal funds market.

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Definitions:

Regression Analysis

A statistical method used for estimating the relationships among variables, often for predicting a dependent variable from one or more independent variables.

Trend Variation

The component of a time series that shows the underlying direction or path that data points are moving over time, disregarding random variations.

Smoothing Constant

A parameter used in exponential smoothing models to weight recent observations more heavily than older ones for forecasting purposes.

Exponential Smoothing

Exponential smoothing is a time series forecasting method for smoothing data values, giving more weight to recent observations while factoring in older data.