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30 March, 04:58

If the Fed decides to reduce bank reserves, it can Question 1 options: A) sell government bonds. B) extend discount loans to banks. C) purchase government bonds. D) print more currency. easynotecard

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  1. 30 March, 05:07
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    The correct answer is A. If the Fed decides to reduce bank reserves, it can sell government bonds.

    Explanation:

    A bond is a transferable security which constitutes a claim on its issuer, it is therefore representative of medium, long-term financial debt, sometimes even in perpetuity. This debt is issued in a given currency, for a defined period and gives the right to the payment of fixed or variable interest, called a coupon which is sometimes capitalized until maturity. Certificates of deposit, or commercial paper, are considered short-term financial instruments, and are therefore quite separate from bonds. Bonds are rated according to the risk profile of their issuers by rating agencies. There is a great diversity of securities on the bond market.

    The issuer of a bond is the borrower; the subscriber or the holder of a bond is the creditor. A bond is frequently negotiable and can be listed on a stock exchange. In practice, securities are traded mainly over the counter. In the event of liquidation, the creditors who are lenders of money have a priority right over the shareholders, who distribute a liquidation bonus after all the creditors have been paid.
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