The federal funds rate is:
a. the minimum amount of reserves the Fed requires a bank to hold.
b. the interest rate that the Fed charges banks who borrow from it.
c. the interest rate on loans made by banks to other banks
d. the maximum percentage of the cost of a stock that can be borrowed from a bank, with the stock offered as collateral.
e. an appeal by the Fed to banks, asking for voluntary compliance with the Fed's wishes.
c
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Which of the following is NOT a disadvantage to inflation targeting?
A) There is a delayed signal about achievement of the target. B) Inflation targets could impose a rigid rule on policymakers. C) There is potential for larger output fluctuations. D) There is a lack of transparency.
Assume that the expectation of declining housing prices cause households to reduce their demand for new houses and the financing that accompanies it. If the nation has low mobility international capital markets and a flexible exchange rate system, what happens to the real risk-free interest rate and net nonreserve-related international borrowing/lending in the context of the Three-Sector-Model?
a. The real risk-free interest rate falls, and net nonreserve-related international borrowing/lending becomes more positive (or less negative). b. The real risk-free interest rate falls, and net nonreserve-related international borrowing/lending becomes more negative (or less positive). c. The real risk-free interest rate rises, and net nonreserve-related international borrowing/lending becomes more negative (or less positive). d. The real risk-free interest rate falls, and net nonreserve-related international borrowing/lending remain the same. e. There is not enough information to determine what happens to these two macroeconomic variables.