If there is a change in the federal funds rate from a target rate due to a decrease in the demand for reserves, the Fed can maintain the target by:
A) causing an upward movement along the supply of reserves curve.
B) causing the supply curve of reserves to shift to the left.
C) causing a downward movement along the supply of reserves curve.
D) causing the supply curve of reserves to shift to the right.
Question 2
The menu cost theory suggests that
A) wages and prices move freely and quickly.
B) the economy is characterized only by perfect competition.
C) there will be no unemployment.
D) firms find frequent price changes to be costly.
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