In the Market for Reserves,if the Federal Funds Rate Is

question 120

Multiple Choice

In the market for reserves,if the federal funds rate is above the interest rate paid on excess reserves,an open market sale ________ the supply of reserves causing the federal funds rate to ________,everything else held constant.

• A)decreases;decrease
• B)increases;decrease
• C)increases;increase
• D)decreases;increase

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Definitions:

Arbitration

A method of dispute resolution where an impartial third party makes a binding decision.

Neutral Third Party

An impartial entity not involved in a conflict or negotiation, often used to facilitate or mediate discussions.

Binding Decision

A ruling or outcome from a legal or quasi-legal process that must be adhered to by the parties involved, leaving no discretion to disregard it.

Classic Two-Party Negotiation

A negotiation framing between exactly two parties where each negotiates to settle on terms or reach an agreement, typically used in business and legal scenarios.