Everything Else Held Constant,in the Market for Reserves,when the Federal

question 17

Multiple Choice

Everything else held constant,in the market for reserves,when the federal funds rate is 1%,increasing the interest rate paid on excess reserves from 1% to 2%

• A)lowers the federal funds rate.
• B)raises the federal funds rate.
• C)has no effect on the federal funds rate.
• D)has an indeterminate effect on the federal funds rate.

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Definitions:

Cardinal Utility Function

Utility function describing by how much one market basket is preferred to another.

Ordinal Utility Function

Utility function that generates a ranking of market baskets in order of most to least preferred.

Budget Line

A graphical representation of all possible combinations of two goods that can be purchased with a given budget and prices.

Slope

The rate at which a line or curve inclines or declines, indicating the steepness.