Recall the Application About the Fed's Response to the Collapse

question 69

Multiple Choice

Recall the Application about the Fed's response to the collapse of the investment house Bear Stearns as well as its handling of the 2008 financial crisis with respect to other financial institutions to answer the following question(s) .
-Recall the Application. In response to the financial crisis, the Fed implemented a new policy in which it began to pay interest on deposits held at the Fed. This move would ________ deposits held at the Fed and ________ the Fed's ability to make loans.

• A) decrease; decrease
• B) decrease; increase
• C) increase; decrease
• D) increase; increase

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Definitions:

Par Value

The nominal value of a bond, stock, or other security, as stated by the issuer upon issuance.

Discount

A reduction applied to the usual cost of goods, services, or invoices, often to encourage prompt payment or increase sales.

Preferred Stock

A type of stock that grants holders priority dividends, often with fixed rates, and preferential treatment in the event of liquidation over common stockholders.

Par Value

The face value of a bond or stock as stated by the issuer, which bears no relation to its market value.