26.

The target federal funds rate is set by:

a.the chairman of the Federal Reserve Board.

b.the President of the United States.

c.the Secretary of the Treasury.

d.the Fed's Open Market Committee.

If the Federal Reserve raises the federal funds rate, which one of the following will not tend to result?

a.The money supply will fall.

b.Car loan and home mortgage rates will rise.

c.Businesses will find it easier to obtain funds to expand.

d.Inflation will decline.

Which of the following would shift the supply curve for loans to the right, reducing short-term interest rates?

a.An increase in the amount of money the Fed makes available to banks

b.An increase in margin requirements

c.A reduction in discount lending by the Fed to banks

d.An increase in the desire of consumers to borrow money

If the Federal Reserve increases the federal funds rate dramatically, which of the following would we expect to happen?

a.The price of houses would increase.

b.The amount of credit card borrowing would increase.

c.The price of cars would decrease.

d.People with adjustable rate mortgages would be better off.

If the inflation rate is growing larger, which one of the following would the Fed need to do to reduce the inflation rate?

a.Lower margin requirements

b.Lower reserve requirements

c.Encourage more discount borrowing

d.Increase the federal funds rate