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:

UCC

This legislative compendium, known as the Uniform Commercial Code, sets the standards for all commercial transactions within the US borders.

Certified Check

A type of check for which the issuing bank guarantees the availability of funds by verifying the drawer's signature and setting aside the check amount.

Bank's Signature

An authorized signature from a bank representative, used to validate or authorize transactions and documents.

Certified Checks

Checks guaranteed by a bank, verifying that the signature is genuine and that the check writer has sufficient funds in their account.