If the Federal Funds Rate Equals the Primary Credit Discount

question 17

Multiple Choice

If the federal funds rate equals the primary credit discount rate, the Fed is likely to ____securities in the open market, which will cause the federal funds rate to_____ .

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

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Definitions:

Growing Annuity

A growing annuity is a type of annuity payment that increases at a constant rate over time, often used to model increasing cash flows like rent or royalties.

Fixed Period

A specified duration of time during which certain conditions or rules are applied, often in financial contracts or investment terms.

Growing Annual Cash Flows

Refers to the increment in cash inflows that a business experiences annually, often attributed to factors like increased sales or cost-efficiency measures.

Growing Perpetuity

A stream of cash flows that continue indefinitely and grow at a constant rate.