Answer the following statements true (T) or false (F)
1) When the Fed raises the interest rate paid on reserves, it discourages bank lending.
2) When the Fed pays interest on reserves held at Fed banks, the interest rate used is the
discount rate.
3) The prime interest rate and the federal funds rate normally change in opposite directions.
4) The largest single liability of the Federal Reserve Banks is their outstanding loans to
commercial banks.
1) T
2) F
3) F
4) F
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A black market for housing exists because of a rent ceiling. The rent for housing in the black market is
A) the same as the equilibrium rent. B) lower than the ceiling rent. C) somewhere between the ceiling rent and the maximum rent a tenant is willing to pay. D) somewhere between zero and the equilibrium rent. E) not defined because the market is not legal.
If good A is a normal good and income increases, the equilibrium price of A ________ and the equilibrium quantity of A ________
A) rises; increases B) rises; decreases C) falls; decreases D) falls; increases
When each individual has consistent preferences, but those of the community are not consistent, it is known as
A. agenda manipulation. B. majority rule. C. voting paradox. D. logrolling.
What explains any divergence between nominal and real GDP?
What will be an ideal response?