Since 2002, the Fed has set the primary discount rate above the IOER rate. Why is this likely to prevent the spikes in the market federal funds similar to the ones that occurred in previous years?
What will be an ideal response?
Prior to 2002 the Fed discouraged banks from borrowing from them, primarily because the discount rate was low. Now a bank would borrow from the Fed if the rate it was going to pay to the Fed were less than the market federal funds rate (assuming the bank has adequate collateral to borrow from the Fed). In those situations where the demand for reserves is high most banks would turn to the Fed before paying a market rate that is more than 100 basis points above the target rate. To the degree that banks turn to the Fed instead of borrowing from each other, the demand for federal funds would ease and the market rate would not rise as much as it otherwise might.
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If University of Nebraska increased its season football ticket sales from 43,000 to 47,000 when it lowered price from $350.00 to $300.00, then its demand for season tickets must be ________ because total revenue ________ when the price was lowered
A) elastic; decreased B) elastic; increased C) inelastic; decreased D) inelastic; increased
Refer to Figure 15-15. The profit-maximizing price is
A) P1. B) P2. C) P3. D) P4.
Which product will have the most elastic demand curve?
A. Fresh fruit B. Gasoline C. Electricity D. Medical services
A rational individual will never consume a unit of a good if its
A. marginal utility is negative. B. marginal utility is diminishing. C. marginal utility is increasing. D. marginal utility is greater than the price of the good.