If the Fed Wanted to Shift to a Restrictive Monetary

question 88

Multiple Choice

If the Fed wanted to shift to a restrictive monetary policy and reduce the money supply, it could

• A) increase the interest rate paid on excess reserves encouraging banks to extend more loans.
• B) decrease the interest rate paid on excess reserves encouraging banks to extend more loans.
• C) decrease the interest rate paid on excess reserves encouraging banks to hold excess reserves rather than extend more loans.
• D) increase the interest rate paid on excess reserves encouraging banks to hold excess reserves rather than extend more loans.

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Definitions:

Rescorla

A significant figure in psychology, known for his work with Robert A. Wagner on the Rescorla-Wagner model of classical conditioning, focusing on how stimuli are associated.

Unconditioned Response

A natural, automatic reaction to a stimulus that occurs without prior learning or conditioning.

Stimulus Discrimination

The ability to distinguish between different stimuli, learning to respond to one stimulus but not to similar others.

Chihuahuas

A small dog breed originating from Mexico, known for its small size, big ears, and spirited personality.