If the Fed wishes to decrease the supply of money and credit, it ...

[charchew]

If the Fed wishes to decrease the supply of money and credit, it may sell government securities, raise the discount rate, or lower required reserve ratios.
 
  Indicate whether the statement is true or false

Question 2

Suppose that with a strictly enforced rent ceiling on rooms of 550 a month, a black market develops. How high could the black market rent be and would the on-campus housing market be fair? Explain your answer.
 
  What will be an ideal response?

[miss.ashley]

Answer to Question 1

FALSE

Answer to Question 2

The black market rent could be as high as 600 a month, which is the maximum rent someone is willing to pay for the 2,000th room. If a black market develops, using the fair results approach, the market is not fair because the poorest students cannot afford the higher black market rent. Using the fair rules approach, the market is not fair because the rent ceiling blocks some voluntary exchanges unless the buyers and sellers are willing to participate in the black market.