A 1% Increase in the Fed Funds Rate,an Overnight Inter-Bank

question 20

Multiple Choice

A 1% increase in the fed funds rate,an overnight inter-bank rate often targeted by the Federal Reserve,is most likely to cause

• A) a 1% increase in prices within a year
• B) a nearly instantaneous increase in output and a reduction in unemployment
• C) a 1% increase in the money supply (M1) over a two-year period
• D) gradual reductions in the money supply, inflation, output, and employment
• E) other interest rates throughout the economy to fall by about 1%

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Definitions:

Predetermined Number

A specific quantity or number established in advance, often used in contexts involving limits, targets, or quotas.

Oral Contracts

Agreements made through spoken words and promises between parties, which can be legally binding, though harder to prove than written contracts.

Written Contracts

Formal agreements documented in writing that outline the terms, conditions, rights, and obligations of the parties involved.

Planning Process

A systematic series of actions directed towards the achievement of a goal or strategy.