If the Interest Rate Is Below the Fed's Target,the Fed

question 109

Multiple Choice

If the interest rate is below the Fed's target,the Fed should

• A)buy bonds to increase bank reserves.
• B)buy bonds to decrease bank reserves.
• C)sell bonds to increase bank reserves.
• D)sell bonds to decrease bank reserves.

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Definitions:

Net Present Value

A financial metric that calculates the value of a series of cash flows by discounting them back to the present using a specific discount rate.

Variable Cost

Expenses that vary depending on the amount of products or services a company generates.

Sensitivity Analysis

A technique designed to analyze the effect that varied values of an independent variable exhibit on a particular dependent variable, considering certain presuppositions.

NPV Estimates

Predicted calculations of Net Present Value, which assesses the worth of a project or investment by discounting its future cash flows to their present value.