Which of the following is true of the federal funds rate?
a. It is the interest rate that one bank charges another for overnight lending.
b. It is the interest rate that the Federal Reserve Bank charges commercial banks for borrowing money.
c. It is the interest rate you earn in your saving account.
d. It is the interest rate the bank charges business firms for borrowing money.
e. It is the interest rate that a domestic bank charges a foreign bank for borrowing money.
Question 2
Assume a price floor is imposed in the wheat market at the equilibrium price and that a price ceiling is imposed in the gasoline market at the equilibrium price. An increase in supply in both the wheat and gasoline markets will create:
a. surpluses in both the wheat and gasoline markets.
b. shortages in both the wheat and gasoline markets.
c. a surplus in the wheat market and an increase the quantity of gasoline traded.
d. a surplus in the wheat market and a shortage in the gasoline market.
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