Question

Q - Which of the following is called the Federal Funds rate?

a. The interest rate at which banks borrow money from the Fed.

b. the interest rate at which one bank borrows money from another bank.

c. the interest rate at which investors borrow money from banks.

d. all of the above

Q - Which of the following statement(s) is true?

a. If the income increases, then money demand increases

b. If the price level increases, then money demand increases

c. If the interest rate increases, then money demand decreases

d. All of the above

Answer 1

a) Federal fund rate is the rate at which the banks borrow and lend money form each other, the answer is "B".

b) "D"

All the statement are true, as the income increases the money demand will increase, as the price level increases the money demand will increase and interest rate increase will decrease the money demand.