Central Banks Can Use Monetary Policy to

question 66

Multiple Choice

Central banks can use monetary policy to

• A) turn prices from inflexible to flexible.
• B) force private banks to lend out reserves.
• C) make it easier for people and businesses to borrow.
• D) print money.
• E) steer the economy out of overexpansion.

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Definitions:

Preferred Stock

A class of ownership in a corporation that has a higher claim on assets and earnings than common stock, usually with fixed dividends.

Cost of Retained Earnings

The opportunity cost for shareholders for having the company retain the earnings instead of distributing them, often considered in investment and dividend decisions.

Risk Free Rate

The theoretical rate of return of an investment with zero risk of financial loss, often represented by the yield on government bonds.

Beta

A measure of a stock's volatility in relation to the overall market; a beta greater than one indicates higher than market volatility.