If the Demand for Reserves Remains Constant and the Market

question 20

Multiple Choice

If the demand for reserves remains constant and the market federal funds rate is below the target rate, the Fed would:

• A)increase the supply of reserves.
• B)decrease the supply of reserves.
• C)do nothing; the Fed will let the market work.
• D)alter the demand for reserves.

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Definitions:

June Cash Budget

A financial plan that estimates the cash inflows and outflows for a business during the month of June, aiding in managing liquidity.

Cash Receipts

Money received by a business or individual, often recorded in the financial records to track income.

Cash Payments

Money disbursed by a business for various purposes, including operating expenses, debt repayment, and asset purchases.

Activity-Based Budgeting

A budgeting approach where budgets are developed based on the activities and resources needed to achieve specific goals or outputs.