-In the Above Figure, If We Begin at S2 and the Fed

question 261

Multiple Choice

-In the above figure, if we begin at S2 and the Fed buys bonds

• A) the price of bonds falls, and the interest rate rises.
• B) the price of bonds falls, and so does the interest rate.
• C) the price of bonds rises, and so does the interest rate.
• D) the price of bonds rises, and the interest rate falls.

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Definitions:

P/E Ratio

The price-to-earnings ratio is a measure of a company's current share price relative to its per-share earnings.

Market Price

The current price at which an asset or service can be bought or sold, determined by supply and demand dynamics in the market.

Net Earnings

Net earnings, also known as net income, represent the total profit of a company after all expenses, taxes, and costs have been subtracted from total revenue.

Equity Multiplier

A financial leverage ratio that measures the proportion of a company's assets that are financed by its shareholders' equity.