In an Attempt to Bring Lenders and Borrowers Together Following

question 256

Multiple Choice

In an attempt to bring lenders and borrowers together following the financial crisis of 2008,the Federal Reserve made a large amount of new funds available to financial markets.The Fed expected this to increase in the money supply and the total amount of lending because of the multiplier effect,in which a given amount of new reserves results in a multiple increase in

• A)stockholders' equity.
• B)bank deposits.
• C)long-term debt.
• D)required reserves.

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Definitions:

Market Risk Premium

The excess return that investors require for choosing a risky investment over a risk-free one.

Excess Return

The return on an investment that exceeds the return on a risk-free asset such as a Treasury bond.

Risk-Free Asset

A secure financial asset offering a promised payoff without any chance of losing money, commonly found in the form of government bonds.

Lithium-Base Grease

A type of lubricant made from lithium soap, used for its high resistance to extreme temperatures and water washout.