The Fed Influences the Interest Rate by Using Which of the Following

question 207

Multiple Choice

The Fed influences the interest rate by using which of the following tools?
I.open market operations
Ii.taxes on bank accounts
Iii.changes in required reserve ratios

• A)i only
• B)ii only
• C)iii only
• D)Both i and iii
• E)i,ii and iii

---

Definitions:

Compounded Annually

The method of calculating interest where the total interest is added to the principal once per year, resulting in interest earning interest annually.

Perpetuity

A type of annuity that pays a fixed sum of money to an individual indefinitely.

Compounded Quarterly

Compounded Quarterly is a method of calculating interest where the interest earned over a quarter is added to the principal, and the subsequent interest calculation will include the previously earned interest.

Deferral Period

A span of time during which payments, especially loan or insurance premiums, are postponed.