If the Federal Reserve Wants to Lower the Monetary Base

question 68

Multiple Choice

If the Federal Reserve wants to lower the monetary base and the money supply,it will

• A) increase bank reserves.
• B) lower the discount rate.
• C) sell government securities.
• D) lower reserve requirements.

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Definitions:

Basis Point

A unit of measure used in finance to describe the percentage change in value or rate of a financial instrument, equal to 1/100th of 1%.

Coupon Rate

The percentage of face value paid as interest on a bond each year.

Current Yield

The interest or dividend income an investment generates, expressed as a percentage of the investment's current market price.

Face Value

The original value of a financial instrument as stated on the certificate or contract.