If the Fed Raises the Interest Rate Paid on Excess

question 184

Multiple Choice

If the Fed raises the interest rate paid on excess reserves while holding the federal funds rate unchanged, then banks will

• A) lend more reserves in the federal funds market and keep more excess reserves.
• B) lend fewer reserves in the federal funds market and keep more excess reserves.
• C) not keep excess reserves or lend reserves in the federal funds market.
• D) not react to it.

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Definitions:

Hostile Audience

A group of listeners or viewers who are opposed to the speaker's message or viewpoint.

Credible Message

Information or communication that is believable and trustworthy based on evidence or reputation.

Emotionally Based

Decisions or actions driven primarily by one's feelings rather than by analytical thinking.

Logic

The science of reasoning, proof, thinking, or inference, often used to structure arguments or analyze propositions.