When the Federal Reserve System Wants to Increase the Money

question 72

Multiple Choice

When the Federal Reserve System wants to increase the money supply, which of the following actions would the Fed choose?

• A) It purchases U.S. government securities.
• B) It increases the discount rate.
• C) It increases the required reserve ratio.
• D) It sells bonds on the open market.

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Definitions:

Land Account

An account on a company's balance sheet that represents the cost of land owned by the company without any depreciation applied, since land is considered to have an unlimited useful life.

Investment Account

An account held at a financial institution for the purpose of managing securities, such as stocks and bonds, for investment purposes.

Equity Method

An accounting technique used to record investments in other companies, where the investment is initially recorded at cost and adjusted over time for the investor's share of the investee's net profits or losses.

Undervalued Inventory

Inventory items that are reported at a value lower than their actual market value or cost of replacement.