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Bank Reserves, Federal Funds Rate, and Interest Rates Assignment | Homework For You

7. Which of the following best describes the relationship between bank reserves, the federal funds rate, and a decrease in interest rates for consumers and business?

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a. If the FOMC uses monetary policy to increase the amount of reserves in the banking system, the federal funds rate will decrease, which will result in generally lower interest rates.

b. If the FOMC uses monetary policy to decrease the amount of reserves in the banking system; the federal funds rate will decrease, which will result in generally lower interest rates.

c. If the FOMC uses monetary policy to increase the amount of reserves in the banking system, the federal funds rate will increase, which will result in generally lower interest rates.

d. If the FOMC uses monetary policy to decrease the amount of reserves in the banking system, the federal funds rate will increase, which will result in generally lower interest rates.

8. If the inflation rate were falling and the unemployment rate were high and rising, the FOMC would likely respond by doing which of the following?

a. Increasing the federal funds target rate and selling government securities

b. Increasing the federal funds target rate and buying government securities

c. Decreasing the federal funds target rate and selling government securities

d. Decreasing the federal funds target rate and buying government securities. Get Economics homework help today

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