If the Federal Reserve Wished to Engage in Expansionary Monetary

question 71

Multiple Choice

If the Federal Reserve wished to engage in expansionary monetary policy it could

• A)raise the primary credit rate.
• B)sell government debt.
• C)lower the reserve ratio.
• D)raise the Federal Funds rate target.

---

Definitions:

Net Present Value

A calculation used to assess the profitability of an investment, factoring in the present values of all cash inflows and outflows.

Real Rate Of Return

The annual percentage gain or loss on an investment, adjusted for inflation, providing a more accurate measure of the purchasing power of the return.

Risk Premium

The risk premium is the additional return an investor requires for choosing a risky investment over a risk-free asset, compensating for the extra risk undertaken.

Arithmetic Average Return

The simple average of a series of returns generated over a period of time.