To Lower the Short-Term Interest Rate, the Federal Reserve Can

question 54

Multiple Choice

To lower the short-term interest rate, the Federal Reserve can:

• A) buy Treasury bills.
• B) sell Treasury bills.
• C) tell the banks to make more loans.
• D) tell the banks to make fewer loans.

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Definitions:

Mexican Pesos

The currency of Mexico, abbreviated as MXN.

Foreign Exchange Gain

A profit arising from the increase in value of one currency against another in which a company holds assets or liabilities.

Non-Interest-Bearing Note

A financial instrument that does not accrue interest over its life, promising to pay the principal amount at maturity.

U.S. Dollar Equivalent

The value of a foreign currency expressed in terms of the amount of U.S. dollars it can be exchanged for.