The upper limit to the federal funds rate is A) the interest rate on reserves, because when the federal funds rate gets above a certain level , banks only want to hold reserves. B) the discount rate, because if the federal funds rate were to go higher, banks would borrow from the Fed instead of from other banks. C) the loan rate in the market, because banks are not willing to pay more for borrowing reserves than they get from lending. D) there is no upper limits to the federal funds rate. 2. If the unemployment rate is falling from 4 to 3%, while the inflation rate is increasing to 5%, the Fed will most likely: A) increase the target for the federal funds rate. B) increase the money supply C) not change much D) decrease the target for the federal funds rate E) decrease the inflation rate by setting a price ceiling. 3. When bond interest rates fall, the relative expected return on holding stocks goes___, which means that stock demand and thereby stock prices will___ , leading to an_____ in people's wealth and therefore in spending. (Note that this is when interest rates actually fall, not when people expect interest rates to fall in the future.) A) down , increase, increase B) up, increase , increase C) up , decrease , decrease D) down , decrease, decrease
- The upper limit to the federal funds rate is
A) the interest rate on reserves, because when the federal funds rate gets above a certain level , banks only want to hold reserves.
B) the discount rate, because if the federal funds rate were to go higher, banks would borrow from the Fed instead of from other banks.
C) the loan rate in the market, because banks are not willing to pay more for borrowing reserves than they get from lending.
D) there is no upper limits to the federal funds rate.
2. If the
A) increase the target for the federal funds rate.
B) increase the money supply
C) not change much
D) decrease the target for the federal funds rate
E) decrease the inflation rate by setting a
3. When bond interest rates fall, the relative expected return on holding stocks goes___, which means that stock
A) down , increase, increase
B) up, increase , increase
C) up , decrease , decrease
D) down , decrease, decrease
4. If the Fed lowers interest rates, the value of the US dollar will____ which will lead do a(n)___ in spending on US goods.
A) increase, decrease
B) decrease, decrease
C) decrease, increase
D) increase, increase
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