In Response to the Sharp Decline in Stock Prices in October

question 52

Multiple Choice

In response to the sharp decline in stock prices in October 1987,the Federal Reserve

• A)increased the money supply and increased interest rates.
• B)increased the money supply and decreased interest rates.
• C)decreased the money supply and increased interest rates.
• D)decreased the money supply and decreased interest rates.

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Definitions:

Uncertainty

The degree to which the outcome of an event, choice, or investment is unknown.

Constant Growth DDM

The Dividend Discount Model assumes dividends grow at a constant rate indefinitely, used to estimate the value of a company's stock.

Preferred Stock

A class of ownership in a corporation that has a higher claim on assets and earnings than common stock, usually with fixed dividends.

Common Stock

Equities, or equity securities, issued as ownership shares in a publicly held corporation. Shareholders have voting rights and may receive dividends based on their proportionate ownership.