During a banking crisis during the period of free banking, the unexpected surge in the demand for money in the form of specie would cause bankers to call in loans which would, in turn, squeeze credit, slow output and increase unemployment

Everything else remaining unchanged, what will happen if the Fed sells government bonds in the open market and borrowed reserves is zero?

A) It will cause both the equilibrium federal funds rate and equilibrium quantity of reserves to fall. B) It will cause the equilibrium federal funds rate to fall, but no change in the equilibrium quantity of reserves. C) It will cause the equilibrium federal funds rate to rise, but no change in the equilibrium quantity of reserves. D) It will cause the equilibrium federal funds rate to rise and the equilibrium quantity of reserves to fall.

The theory of short-run economic fluctuations is uncontroversial

a. True b. False Indicate whether the statement is true or false