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The Fed Can Force the Banking System to Decrease the Money

question 19

True/False

The Fed can force the banking system to decrease the money supply by tightening monetary policy, but it cannot force the banking system to increase the money supply by loosening monetary policy.


Definitions:

Market Rate

The current interest rate available in the marketplace on loans, bonds, or deposits, often influenced by supply and demand and the monetary policy of central banks.

Effective-interest Amortization

A method of amortizing the premium or discount on bonds payable that reflects interest expense on the outstanding balance of the bond over its life.

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