Which of the Following Is Most Likely to Occur If

question 8

Multiple Choice

Which of the following is most likely to occur if the quantity demanded of reserves is less than the quantity supplied of reserves?

• A)The fed funds rate will fall.
• B)The fed funds rate will rise.
• C)Discount borrowing will decrease.
• D)Both discount borrowing will decrease and the fed funds rate will rise.

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Definitions:

Comparative Advantage

The ability of an individual, company, or country to produce a good or service at a lower opportunity cost than its competitors.

Absolute Advantage

The ability of an entity to produce more of a good or service than competitors using the same amount of resources.

Comparative Advantage

The ability of an entity to produce a good or offer a service at a lower opportunity cost than other entities, leading to more efficient trade possibilities.

Production

Production refers to the process of combining various material inputs and immaterial inputs (plans, knowledge) to make something for consumption (output).