(13) In the market for reserves, if the excess reserves, an open market purchase

Question

(13) In the market for reserves, if the excess reserves, an open market purchasethe causes the federal funds rate to fall, everything else held constant federal funds rate is above the interest rate paid on of reserves which A) decreases supply B) decreases; demand C) increases; supply D) increases; demand (14) E rate is 3%, increasing the interest rate paid on excess reserves verything else held constant, in the market for reserves, when the federal funds from 1% to 2% A) lowers the federal funds rate. B) raises the federal funds rate. C) has no effect on the federal funds rate. D) has an indeterminate effect on the federal funds rate. (15) Suppose on any given day there is an excess demand of reserves in funds market. If the Federal Reserve wishes to keep the federal funds rate at its current level, then the appropriate action for the Federal Reserve to take is a market the federal open , everything else held constant. A) dynamic; sale B) dynamic; purchase C) defensive; sale D) defensive; purchase

Explanation / Answer

13.
C

Purchase via open market operation will increase the supply of funds and it will lead the federal funds rate to come down.

14.
C

The action will not make any impact upon the federal funds rate.

15.
D

With defensive purchase of the government securities, the funds required by the banks will be delivered to them without changing the monetary base. Hence, the excess demand will be wiped out and federal funds rate will also not change.

Related Questions

Navigate

• Browse (All)
• Browse #
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.