Suppose the Fed Announces That It Expects Interest Rates to Fall

question 107

Multiple Choice

Suppose the Fed announces that it expects interest rates to fall in the next quarter. What happens to the demand for money today?

• A) The precautionary demand for money goes up.
• B) The speculative demand for money goes up.
• C) The transaction demand for money goes down.
• D) The speculative demand for money goes down.

---

Definitions:

Solar Output

The total amount of energy that the sun emits over a specific time period.

Polar Ice

Frozen water in the polar regions of Earth, including ice caps, glaciers, and sea ice, which plays a crucial role in the global climate system.

Negative Feedback Loop

A process in a system where the output may feed back into the system to counterbalance changes and maintain stability within the system.

Permafrost

A dense layer of soil under the surface that stays frozen all year long, primarily found in regions near the poles.