Suppose That the Current Federal Funds Rate Is Above the Federal

question 166

Multiple Choice

Suppose that the current federal funds rate is above the federal funds target rate.In order to lower the federal funds rate the Fed will ________________ securities on the open market which will ________________ the supply of reserves in the market for reserves,pushing the rate closer to the target rate.

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

Explain how externalities lead to an inefficient allocation of resources in the absence of government intervention.

Identify scenarios in which market-based solutions can internalize externalities and restore efficiency.

Evaluate the effect of specific taxes and subsidies on achieving efficient market outcomes.

Discern the role of marginal analysis in determining the efficient level of production and consumption.

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Definitions:

Journal Entry

A journal entry is a record of a financial transaction in the accounting books, indicating the accounts and amounts to be debited and credited.

Outstanding Checks

Checks that have been written and recorded in the account ledger but not yet cleared or cashed by the bank.

EFT Deposit

An electronic funds transfer deposit, which represents the digital transfer of money into a bank account.

Petty Cash Fund

is a small amount of cash kept on hand by a business for making immediate and minor payments, reducing the need for check transactions.