If the Federal Open Market Committee Decides to Increase the Money

question 52

Multiple Choice

If the Federal Open Market Committee decides to increase the money supply,then the Federal Reserve

• A)creates dollars and uses them to purchase government bonds from the public.
• B)sells government bonds from its portfolio to the public.
• C)creates dollars and uses them to purchase various types of stocks and bonds from the public.
• D)sells various types of stocks and bonds from its portfolio to the public.

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Definitions:

Equity Securities

Financial instruments representing ownership interest in a company, such as stocks.

Debt Securities

Financial instruments representing a loan made by an investor to a borrower, typically involving periodic interest payments and the return of principal at maturity.

Held-to-maturity Securities

These are financial assets that a company has the intent and ability to hold until they mature.

Amortized Cost

The expense of an intangible asset over its useful life.