How does the Fed manage the federal funds rate?
The federal funds rate is determined by banks that lend and borrow reserves to and from each other for very short periods of time, typically overnight. Banks borrow to meet their reserve requirements. To decrease the federal funds rate, the Fed buys government securities from banks, giving the banks more cash reserves to cover their reserve requirements. As a result, the demand for reserves on the federal funds market decreases, decreasing the federal funds rate. To raise the rate, the Fed sells government securities to the banks.
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There are several conditions that justify limiting imports to ensure the survival of the "infant industry," and to justify government protection. Which of the following is(are) a justification?
I. Knowledge spillovers should be likely. II. Protected firms should have a good chance of moving down along their average cost curves over time to become competitive at world prices. III. Protected firms should have a good chance to reduce future costs and cause their average cost curves to shift downwards. a. I b. II c. I and III d. I, II, and III
In the long run, a leftward shift of the aggregate demand curve will lead to a(n):
a. increase in equilibrium output but will not change the price level in an economy. b. increase in the price level as well as the equilibrium output in an economy. c. decrease in the price level but will leave the equilibrium output unchanged in an economy. d. increase in the price level but will leave the equilibrium output unchanged in an economy. e. decrease in the price level as well as the equilibrium output in an economy.