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AICPA CPA-Business Exam - Topic 2 Question 79 Discussion

To address the problem of a recession, the Federal Reserve Bank most likely would take which of the following actions?
C) Increase the federal funds rate charged by banks when they borrow from one another.
A) Lower the discount rate it charges to banks for loans.
B) Sell U.S. government bonds in open-market transactions.
D) Increase the level of funds a bank is legally required to hold in reserve.

AICPA CPA-Business Exam - Topic 2 Question 79 Discussion

Actual exam question for AICPA's CPA-Business exam
Question #: 79
Topic #: 2
[All CPA-Business Questions]

To address the problem of a recession, the Federal Reserve Bank most likely would take which of the following actions?

Show Suggested Answer Hide Answer
Suggested Answer: C

Choice 'c' is correct. Return on investment equals net income divided by average invested capital:

Choices 'a', 'b', and 'd' are incorrect, per the above calculation.


by Chantell at Dec 22, 2023, 12:59 AM

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Shantell
7 months ago
D would just tighten things up even more, not helpful!
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Joanna
8 months ago
Wait, lowering the discount rate? Is that really enough?
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Colette
8 months ago
C would just make things worse, right?
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Aracelis
8 months ago
I disagree, B would make more sense in a recession.
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Bobbie
8 months ago
A is definitely the right move!
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Larae
9 months ago
I feel like increasing reserve requirements would actually restrict lending, which isn't what we want during a recession, right?
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Kristine
9 months ago
Increasing the federal funds rate seems counterintuitive in a recession, but I can't recall the exact reasoning behind it.
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Anglea
9 months ago
I remember a practice question where selling government bonds was the right answer for tightening the economy, but that doesn't seem to fit here.
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Bette
9 months ago
I think lowering the discount rate makes sense during a recession to encourage banks to lend more, but I'm not entirely sure.
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Noah
9 months ago
I feel pretty confident that the answer is B - selling U.S. government bonds. That would tighten the money supply and help curb inflation during a recession.
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Freeman
9 months ago
I'm a bit confused on this one. The Fed has a few different monetary policy tools, but I'm not certain which one would be most effective for addressing a recession. I'll have to review my notes.
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Gail
9 months ago
Okay, I've got this. The Fed would want to increase the money supply to boost economic activity, so the right answer is A - lowering the discount rate.
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Novella
9 months ago
Hmm, this is a tricky one. I'm not totally sure about the Fed's toolkit for recessions. I'll have to think through the options carefully.
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Aide
9 months ago
I think the key here is to focus on the Federal Reserve's typical actions to address a recession. Lowering the discount rate seems like the most direct way to stimulate the economy.
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Lon
9 months ago
This looks like a pretty straightforward disaster recovery question. I think I can handle this one - the key is to identify the solution that meets all the requirements like cost optimization, guaranteed capacity, and the RPO/RTO targets.
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Chau
9 months ago
I recall that standard deviation isn't a measure of central tendency, but isn't it often confused with the mean? Feels tricky!
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Ming
9 months ago
Hmm, I'm not too sure about this one. I'll need to review my notes on WiFi security protocols before making a decision. Better play it safe and mark this one for review.
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Sharen
10 months ago
I feel like option B might give too many privileges to Rubio and Doe. I think options A or D limit access better, but I'm leaning towards A.
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Jules
1 year ago
Hmm, the Fed lowering rates to address a recession? What is this, the 1980s?
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Lisbeth
1 year ago
D) Increase the level of funds a bank is legally required to hold in reserve.
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Staci
1 year ago
B) Sell U.S. government bonds in open-market transactions.
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Miss
1 year ago
A) Lower the discount rate it charges to banks for loans.
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Bettina
1 year ago
I was going to say C) Increase the federal funds rate, but that would be counterproductive in a recession. Gotta love these tricky Fed questions!
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Charlesetta
1 year ago
A) Lower the discount rate it charges to banks for loans.
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Kristine
1 year ago
Increasing reserve requirements could actually worsen a recession by limiting lending.
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Charolette
1 year ago
D) Increase the level of funds a bank is legally required to hold in reserve.
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Kristine
1 year ago
Selling bonds can also inject money into the economy, good choice!
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Yolande
1 year ago
B) Sell U.S. government bonds in open-market transactions.
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Nicolette
1 year ago
That's correct! Lowering the discount rate can help stimulate borrowing and spending.
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Katy
1 year ago
A) Lower the discount rate it charges to banks for loans.
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Paris
1 year ago
D) Increasing the reserve requirement is a way to tighten the money supply, but I don't think that's the best approach during a recession.
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Valentin
1 year ago
But wouldn't selling bonds decrease the money supply and potentially worsen the recession?
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Malika
1 year ago
I disagree, I believe the answer is B) Sell U.S. government bonds.
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Valentin
1 year ago
I think the answer is A) Lower the discount rate.
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Fernanda
1 year ago
B) Selling U.S. government bonds seems like the right move to me. That would reduce the money supply and help curb inflation.
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Alline
1 year ago
B) Selling U.S. government bonds could indeed help reduce the money supply and control inflation.
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Sylvie
1 year ago
A) Lowering the discount rate could also stimulate borrowing and spending, which could help boost the economy.
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Ernie
1 year ago
B) Selling U.S. government bonds could indeed help reduce the money supply and control inflation.
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Ma
1 year ago
A) Lowering the discount rate could also stimulate borrowing and spending, which could help boost the economy.
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Marisha
1 year ago
That's a good point, selling bonds could also help stimulate the economy.
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Sylvie
1 year ago
I disagree, I believe they would sell U.S. government bonds in open-market transactions to address the recession.
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Marisha
1 year ago
I think the Federal Reserve Bank would lower the discount rate to help with a recession.
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Jaclyn
1 year ago
I think the answer is A) Lower the discount rate. The Federal Reserve typically lowers interest rates to stimulate the economy during a recession.
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Dean
1 year ago
Increasing the level of funds banks are required to hold in reserve could restrict lending.
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Brynn
1 year ago
Increasing the federal funds rate might have the opposite effect.
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Socorro
1 year ago
But selling U.S. government bonds could also be a way to address a recession.
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Twana
1 year ago
I agree, lowering the discount rate can help stimulate the economy.
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