The federal funds market is shown in the graph below. assume the market is in equilibrium and that the federal reserve has established a 5% target for the federal funds rate. a. suppose that banks are nervous about the next election and hold more excess reserves, causing the amount of reserves at banks to increase. show this change in the demand for reserves in the federal funds market. instructions: use the tool provided 'dff,1' to draw a new demand for reserves curve. plot only the endpoints of the line (2 points total). b. in order to keep the federal funds rate at the target rate, the fed will need to conduct an so the quantity of reserves will to meet the change in reserve demand.

Suppose you win a small lottery and have the choice of two ways to be paid: you can accept the money in a lump sum or in a series of payments over time. if you pick the lump sum, you get $2,950 today. if you pick payments over time, you get three payments: $1,000 today, $1,000 1 year from today, and $1,000 2 years from today. 1) at an interest rate of 6% per year, the winner would be better off accepting the (lump sum / payments over time), since it has the greater present value. 2) at an interest rate of 9% per year, the winner would be better off accepting the (lump sum / payments over time), since it has the greater present value. 3) years after you win the lottery, a friend in another country calls to ask your advice. by wild coincidence, she has just won another lottery with the same payout schemes. she must make a quick decision about whether to collect her money under the lump sum or the payments over time. what is the best advice to give your friend? a) the lump sum is always better. b) the payments over time are always better. c) it will depend on the interest rate; advise her to get a calculator. d) none of these answers is good advice.

Sauer food company has decided to buy a new computer system with an expected life of three years. the cost is $440,000. the company can borrow $440,000 for three years at 14 percent annual interest or for one year at 12 percent annual interest. assume interest is paid in full at the end of each year. a. how much would sauer food company save in interest over the three-year life of the computer system if the one-year loan is utilized and the loan is rolled over (reborrowed) each year at the same 12 percent rate? compare this to the 14 percent three-year loan.

Which represents a surplus in the market? a market price equals equilibrium price. b quantity supplied is greater than quantity demanded. c market price is less than equilibrium price. d quantity supplied equals quantity demanded.