If the Fed Changes the Federal Funds Rate

question 65

Multiple Choice

If the Fed changes the federal funds rate

• A)inflation is brought to an immediate halt
• B)the inflation rate increases for several months,but then begins to decreases
• C)major banks try to offset this change by lowering the interest rates they charge on loans
• D)major banks try to offset this change by lowering the interest rates they pay on savings deposits
• E)major banks raise the prime interest rate that they charge to their best customers

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Definitions:

EPS Variability

Fluctuations in a company's earnings per share over time, indicating the volatility of its profitability.

Operating Leverage

A measure of how revenue growth translates into growth in operating income, indicating the fixed versus variable costs structure of a business.

Financial Leverage

A technique employed by companies to increase their market value and return on investment by using debt to finance its operations.

EBIT

Earnings Before Interest and Taxes, a measure of a company's profitability calculated by excluding interest and income tax expenses.