. Until 2008, the Fed could make the market federal funds rate equal the target rate by:
A. setting the discount rate below the federal funds rate.
B. entering the federal funds market as a borrower or a lender.
C. paying higher interest on reserves.
D. mandating that all loans be transacted at the target rate.
Answer: B
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Suppose a Big Mac costs $4.20 in the United States and 9.55 zlotys in Poland. If the exchange rate is 2.77 zlotys per dollar, purchasing power parity predicts that
A) the dollar is undervalued. B) the zloty is undervalued. C) the zloty is overvalued. D) both the dollar and the zloty are undervalued.
A contractionary monetary policy is most likely to reduce output with little impact on inflation when the economy
A. is near full employment and the aggregate supply curve is horizontal. B. is near full employment and the aggregate supply curve is vertical. C. has substantial unemployment and the aggregate supply curve is vertical. D. has substantial unemployment and the aggregate supply curve is horizontal.