Use the Following to Answer Questions

question 222

Multiple Choice

Use the following to answer questions :
Figure: Money Market I
-(Figure: Money Market I) Look at the figure Money Market I. If the money market is initially in equilibrium at point E and the central bank sells Treasury bills, then the interest rate will:

• A)move toward point H.
• B)move toward point L.
• C)remain at point E.
• D)shift rightward.

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Definitions:

Debt Financing

The method of raising capital through the sale of bonds, bills, or notes to individuals or institutional investors which must be repaid at a later date.

Equity Financing

The process of raising capital through the sale of shares in a company.

Term

The time until a debt security’s principal is due to be repaid. Also called the debt’s maturity or time until maturity.

Indirect Transfers

Transactions where assets or money move between entities or locations via intermediaries rather than through a direct exchange.