When the Flow of Money Is Tight, the Price of Short-Term

question 72

Multiple Choice

When the flow of money is tight, the price of short-term loans will be bid ________ and the federal fund rate (FFR) will ________.

• A) up; rise
• B) down; rise
• C) up; fall
• D) down; fall
• E) up in good economic times and down in difficult economic times; vary
• Depending on market forces

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Definitions:

High Prices

Situations where the cost of goods and services are above average or expected levels.

Fed

The Fed, short for Federal Reserve System, is the central banking system of the United States, responsible for monetary policy, including regulating banks and managing the country's money supply.

Member Bank Reserves

The portion of deposits that banks must hold in reserve, either as physical cash or as deposits with the central bank, to ensure liquidity.

Issuing Bank Notes

The process by which a central bank or monetary authority prints and distributes the national currency, which serves as legal tender.