What is the role of the federal funds rate in monetary policy, and how does the central bank use this rate to influence the economy? A) The federal funds rate has no impact on monetary policy. B) The federal funds rate is the interest rate at which banks lend reserves to each other overnight, and the central bank adjusts this rate to influence borrowing costs, spending, and overall economic activity. C) The federal funds rate is the interest rate at which banks lend to consumers, and it is controlled by the government. D) The federal funds rate determines government spending levels.
What is the role of the federal funds rate in monetary policy, and how does the central bank use this rate to influence the economy? A) The federal funds rate has no impact on monetary policy. B) The federal funds rate is the interest rate at which banks lend reserves to each other overnight, and the central bank adjusts this rate to influence borrowing costs, spending, and overall economic activity. C) The federal funds rate is the interest rate at which banks lend to consumers, and it is controlled by the government. D) The federal funds rate determines government spending levels.
Chapter15: Monetary Theory And Policy
Section: Chapter Questions
Problem 2.5P
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Question: What is the role of the federal funds rate in monetary policy , and how does the central bank use this rate to influence the economy? A) The federal funds rate has no impact on monetary policy. B) The federal funds rate is the interest rate at which banks lend reserves to each other overnight, and the central bank adjusts this rate to influence borrowing costs, spending, and overall economic activity. C) The federal funds rate is the interest rate at which banks lend to consumers, and it is controlled by the government. D) The federal funds rate determines government spending levels.
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