Explain which interest rate sets the upper limit on the federal funds rate.   The upper limit on the federal funds rate is the _______ because _______.     A. discount rate; the discount rate must be 1 percent higher than the federal funds rate   B. interest on reserves rate; a bank will borrow reserves only if the federal funds rate is less than the interest on reserves rate   C. discount rate; a bank will borrow reserves only if the federal funds rate is less than the discount rate   D. long-term real interest rate; the loanable funds market determines the federal funds rate range

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Chapter11: The Monetary System
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Explain which interest rate sets the upper limit on the federal funds rate.
 
The upper limit on the federal funds rate is the _______ because _______.
 
 
A.
discount rate; the discount rate must be 1 percent higher than the federal funds rate
 
B.
interest on reserves rate; a bank will borrow reserves only if the federal funds rate is less than the interest on reserves rate
 
C.
discount rate; a bank will borrow reserves only if the federal funds rate is less than the discount rate
 
D.
long-term real interest rate; the loanable funds market determines the federal funds rate range
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