Answer Happy

surely larger than 4 probably smaller than 4 (d) zero, sin e there are excess reserves in the system. 2. The demand arve for reserves is downward sloping with respect to the federal funds rate because (a) a higher ederal funds rate leads to higher prices in the economy, and therefore lower demand for goods/services Kb) a higher federal funds rate acts as an incentive for banks to keep larger amounts of excess reserves (e) a higher federal funds rate makes borrowing from other banks in the interbank market more expensive (d) a higher federal funds rate increases money supply 3. Which of the followings is a key target for a central bank? (a) the marginal propensity to consume by households (b) the slope of the aggregate supply curve (c) the rate of unemployment d) the rate of money growth 11. Which of the followings best describes the current monetary policy strategy adopted by the Federal Reserve? (a) The Fed sets the desired federal funds rate (FFR), and then undertakes open market operations (OMO) to attain such target (b) The Fed decides on the magnitude of sales or purchases of T-bills in OMO, and then lets the market determine the FFR The Fed decides on the overall change of money supply in the banking system, and then figures out the appropriate reserve requirement (d) The Fed decides simultaneously the desired FFR and the the overall change of money supply in