Suppose That the Market for Reserves Is in Equilibrium and Then

question 67

Multiple Choice

Suppose that the market for reserves is in equilibrium and then the Federal Reserve decreases the quantity of reserves by $2 billion. The federal funds rate will __________and the supply of loanable funds will __________.

• A) rise; decrease
• B) fall; decrease
• C) fall; increase
• D) rise; increase

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Definitions:

Disaffirm

To officially reject, deny, or revoke a statement or agreement, especially in the context of contracts by minors or under conditions of misrepresentation.

Undue Hardship

A situation where accommodations or changes, typically required by law, would result in significant difficulty or expense for an employer or institution.

Right of Disaffirmation

A legal right allowing minors to void contracts they have entered into, based on their incapacity to fully understand the terms.

Ratified

Formally approved or confirmed, often in the context of treaties, contracts, or legislative acts.