In the Market for Reserves,if the Federal Funds Rate Is

question 122

Multiple Choice

In the market for reserves,if the federal funds rate is above the interest rate paid on excess reserves,an open market purchase ________ the supply of reserves and causes the federal funds interest rate to ________,everything else held constant.

• A)decreases;fall
• B)increases;fall
• C)increases;rise
• D)decreases;rise

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Definitions:

Compounded Annually

Involves the calculation and addition of interest to the principal sum of a loan or deposit once every year.

Compounded Quarterly

A method where interest is added to the principal every three months which allows interest to be earned on the previously accumulated interest.

Scholarships

Financial support awarded to students based on academic or other achievements to help fund their education.

Trust Fund

A fund comprised of a variety of assets intended to provide benefits to an individual or organization, managed by a trustee.