Suppose,at a Given Federal Funds Rate,there Is an Excess Demand

question 74

Multiple Choice

Suppose,at a given federal funds rate,there is an excess demand for reserves in the federal funds market. If the Fed wants the federal funds rate to stay at that level,then it should undertake an open market ________ of bonds,everything else held constant. If the Fed does nothing,however,the federal funds rate will ________.

• A)sale;increase
• B)purchase;increase
• C)sale;decrease
• D)purchase;decrease

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Definitions:

Current

In finance, "current" typically refers to assets and liabilities that are expected to be realized or settled within one year from the reporting date.

Interest Expense

The cost incurred by an entity for borrowed funds over a period of time.

Net Income

The amount of earnings remaining after all expenses and taxes have been subtracted from total revenue.

Return Ratio

Financial metrics used to evaluate the efficiency or profitability of an investment relative to its cost.