In Figure 15

question 38

Multiple Choice

In Figure 15.3,the Fed can change the equilibrium interest rate from 2 percent to 6 percent by doing all of the following except

• A)Selling bonds in the open market.
• B)Raising the discount rate.
• C)Raising the reserve requirement.
• D)Decreasing the federal funds rate.

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Definitions:

Rates of Return

The positive or negative financial outcome of an investment over an agreed-upon period, expressed as a percent of the investment's initial outlay.

Present Value

The now value of a sum of money to be received in the future or a series of financial inflows, accounting for a specific return rate.

Simple Interest

Simple interest is a method of calculating the interest charge on a loan or investment based on the original principal amount and not on accumulated interest.

Discount

A reduction applied to the normal cost of goods or services, or in finance, the process of determining the present value of future cash flows by applying a discount rate.