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:

Pressure

The force exerted per unit area; in fluids, it is often caused by gravity acting upon the fluid's mass.

Photoreceptors

Specialized cells located in the retina of the eye that are sensitive to light, enabling vision.

Vertebrate Eye

The complex optical organ in vertebrates that enables vision by detecting light and converting it into electro-chemical impulses in neurons.

Layer

A sheet, coat, or level of material, often one of several, that lies over or under another.