In the Short Run, If the Federal Reserve Reduces Interest

question 95

Multiple Choice

In the short run, if the Federal Reserve reduces interest rates, firms:

• A) do not change their capital stock.
• B) buy less capital and the marginal product of capital falls.
• C) allow their capital to fully depreciate.
• D) accumulate more inventory.
• E) buy more capital and the marginal product of capital falls.

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Definitions:

Petty Cash

A small amount of cash on hand used for covering minor or incidental expenses within a business.

Bank Reconciliation

The process of matching the balances in an entity's accounting records for a cash account to the corresponding information on a bank statement.

Checking Account Balance

The amount of money currently available for withdrawal in a person's or entity's checking account.

Outstanding Checks

Checks that have been written and recorded in the paying entity's check register but have not yet been cashed or cleared by the bank.