If the Federal Funds Rate Falls Below the Targeted Rate

question 34

Multiple Choice

If the federal funds rate falls below the targeted rate, the Trading Desk ____ the amount of reserves available to depository institutions in order to bring the fed funds rate back to the targeted level.

• A)reverses
• B)increases
• C)decreases
• D)leaves the same

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Definitions:

Cognitive Dissonance

A psychological discomfort experienced when holding two or more conflicting cognitions (beliefs, attitudes, or behaviors).

Groupthink

A psychological phenomenon that occurs within a group of people when the desire for harmony or conformity in the group results in an irrational or dysfunctional decision-making outcome.

Self-Censorship

The act of withholding one's thoughts, opinions, or feelings due to fear of social or official repercussions.

Illusion of Vulnerability

A cognitive bias where individuals underestimate their susceptibility to negative events.