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:

Refrigerant

The cooling media used in air-conditioning and trailer reefer systems; a liquid capable of vaporizing at low temperatures such as ammonia, propane, R-12, R-134a, R-1234yf, etc.

Absolute Zero

The lowest possible temperature, at which all molecular movement stops, theoretically -273.15°C or 0 Kelvin.

Heat Energy

The form of energy transferred between systems or objects with different temperatures, often perceived as warmth.

States of Matter

The distinct forms that different phases of matter take on, traditionally categorized as solid, liquid, gas, and plasma.