Question : 21) Suppose any given day the prevailing equilibrium federal funds : 1373787

 

21) Suppose on any given day the prevailing equilibrium federal funds rate is below the Federal Reserve’s federal funds target rate. If the Federal Reserve wishes for the federal funds rate to be at their target level, then the appropriate action for the Federal Reserve to take is a ________ open market ________, everything else held constant.

A) defensive; sale

B) defensive; purchase

C) dynamic; sale

D) dynamic; purchase

 

22) In the market for reserves, if the federal funds rate is above the interest rate paid on excess reserves, an open market sale ________ the ________ of reserves, causing the federal funds rate to increase, everything else held constant.

A) increases; supply

B) increases; demand

C) decreases; supply

D) decreases; demand

 

23) In the market for reserves, a lower discount rate

A) decreases the supply of reserves.

B) increases the supply of reserves.

C) lengthens the vertical section of the supply curve of reserves.

D) shortens the vertical section of the supply curve of reserves.

 

24) In the market for reserves, a lower interest rate paid on excess reserves

A) decreases the supply of reserves.

B) increases the supply of reserves.

C) decreases the effective floor for the federal funds rate.

D) increases the effective floor for the federal funds rate.

25) Everything else held constant, in the market for reserves, when the federal funds rate is 3%, lowering the discount rate from 5% to 4%

A) lowers the federal funds rate.

B) raises the federal funds rate.

C) has no effect on the federal funds rate.

D) has an indeterminate effect on the federal funds rate.

 

26) Everything else held constant, in the market for reserves, when the federal funds rate is 3%, increasing the interest rate paid on excess reserves from 1% to 2%

A) lowers the federal funds rate.

B) raises the federal funds rate

C) has no effect on the federal funds rate.

D) has an indeterminate effect on the federal funds rate.

 

27) Everything else held constant, in the market for reserves, when the federal funds rate is 5%, lowering the discount rate from 5% to 4%

A) lowers the federal funds rate.

B) raises the federal funds rate.

C) has no effect on the federal funds rate.

D) has an indeterminate effect on the federal funds rate.

 

28) Everything else held constant, in the market for reserves, when the federal funds rate is 1%, increasing the interest rate paid on excess reserves from 1% to 2%

A) lowers the federal funds rate.

B) raises the federal funds rate.

C) has no effect on the federal funds rate.

D) has an indeterminate effect on the federal funds rate.

 

29) Everything else held constant, in the market for reserves, when the federal funds rate is 3%, raising the discount rate from 5% to 6%

A) lowers the federal funds rate.

B) raises the federal funds rate.

C) has no effect on the federal funds rate.

D) has an indeterminate effect on the federal funds rate.

30) Everything else held constant, in the market for reserves, when the federal funds rate is 3%, lowering the interest rate paid on excess reserves rate from 2% to 1%

A) lowers the federal funds rate.

B) raises the federal funds rate.

C) has no effect on the federal funds rate.

D) has an indeterminate effect on the federal funds rate.

 

 

 

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