If the Fed Wishes to Increase the Interest Rate,it Can

question 9

Multiple Choice

If the Fed wishes to increase the interest rate,it can do so by

• A) selling bonds
• B) buying bonds
• C) increasing the money supply
• D) setting a higher prime lending rate
• E) encouraging the public to buy bonds

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Definitions:

Expiration Date

In finance, the date at which a derivative contract such as an option or futures agreement ceases to exist.

Tax-Exempt Bonds

Bonds issued by government entities that offer interest payments not subject to federal income tax, and in some cases, state and local taxes.

Yield

The income return on an investment, such as the interest or dividends received, expressed as an annual percentage based on the investment's cost, its current market value, or its face value.

Taxable Bonds

Bonds whose interest payments are subject to federal, state, or local income taxes.