Macroeconomics Plus MyEconLab with Pearson eText (1-semester access)
6th Edition
ISBN: 9780134435046
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
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Chapter 15, Problem 15.2RDE
To determine
Movements in federal funds rate.
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Find a recent practical article online that describes a real-world example regarding "Federal funds rate AND economy". Please post your summary of the article
Distinguish between the Federal funds rate and the prime interest rate. Why is one higher than the other? Why do changes in the two rates closely track one another?
Targeting the federal funds rate ( is, is not ) as important a tool today as it was before the 2007-2009 financial crisis. During the financial crisis when the federal funds rate was near zero, the Fed ( did, did not ) wish to go lower than zero and came up with alternatives to influence interest rates and lending: the administered rates. Today, the Fed still sets a target for the federal funds rate but finds it more effective to change the administered rates. By doing that, the Fed can stimulate or restrict lending. The federal funds rate is the Feds policy rate and (is, is not ) useful when providing forward guidance.
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Chapter 15 Solutions
Macroeconomics Plus MyEconLab with Pearson eText (1-semester access)
Ch. 15 - Prob. 15.1.1RQCh. 15 - Prob. 15.1.2RQCh. 15 - Prob. 15.1.3RQCh. 15 - Prob. 15.1.4RQCh. 15 - Prob. 15.1.5PACh. 15 - Prob. 15.1.6PACh. 15 - Prob. 15.1.7PACh. 15 - Prob. 15.1.8PACh. 15 - Prob. 15.2.1RQCh. 15 - Prob. 15.2.2RQ
Ch. 15 - Prob. 15.2.3RQCh. 15 - Prob. 15.2.4RQCh. 15 - Prob. 15.2.5PACh. 15 - Prob. 15.2.6PACh. 15 - Prob. 15.2.7PACh. 15 - Prob. 15.2.8PACh. 15 - Prob. 15.3.1RQCh. 15 - Prob. 15.3.2RQCh. 15 - Prob. 15.3.3RQCh. 15 - Prob. 15.3.4PACh. 15 - Prob. 15.3.5PACh. 15 - Prob. 15.3.6PACh. 15 - Prob. 15.3.7PACh. 15 - Prob. 15.3.8PACh. 15 - Prob. 15.3.9PACh. 15 - Prob. 15.3.10PACh. 15 - Prob. 15.3.11PACh. 15 - Prob. 15.3.12PACh. 15 - Prob. 15.3.13PACh. 15 - Prob. 15.3.14PACh. 15 - Prob. 15.4.1RQCh. 15 - Prob. 15.4.2RQCh. 15 - Prob. 15.4.3PACh. 15 - Prob. 15.4.4PACh. 15 - Prob. 15.4.5PACh. 15 - Prob. 15.4.6PACh. 15 - Prob. 15.5.1RQCh. 15 - Prob. 15.5.2RQCh. 15 - Prob. 15.5.3RQCh. 15 - Prob. 15.5.4PACh. 15 - Prob. 15.5.5PACh. 15 - Prob. 15.5.6PACh. 15 - Prob. 15.5.7PACh. 15 - Prob. 15.5.8PACh. 15 - Prob. 15.5.9PACh. 15 - Prob. 15.6.1RQCh. 15 - Prob. 15.6.2RQCh. 15 - Prob. 15.6.3PACh. 15 - Prob. 15.6.4PACh. 15 - Prob. 15.6.5PACh. 15 - Prob. 15.6.6PACh. 15 - Prob. 15.6.7PACh. 15 - Prob. 15.6.8PACh. 15 - Prob. 15.6.9PACh. 15 - Prob. 15.1RDECh. 15 - Prob. 15.2RDECh. 15 - Prob. 15.3RDE
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- The Federal Funds Rate is: A. A short-term nominal interest rate B. A short-term real interest rate C. A long-term nominal interest rate D. A long-term real interest ratearrow_forwardFor the January 2020 Press Release, answer the following question.A. For Column 8, complete the range of the Federal Funds Target AND the % change from the previous release.B. For Column 9, decide whether the Fed is buying or selling loans and whether they have increased or decreasedthe amount.arrow_forwardexplain and demonstrate graphically the effect of an open market sale on the federal funds rate.arrow_forward
- Your comment has to be more than five(5) sentences, based on researched facts and logical analysis to earn the credit. On December 16th, 2015, FED decided to raise first time the record low target rate of federal reserve fund from 1/4% to 1/2%. On December 14th, 2016, Fed decided to raise the second time the federal fund rate from 1/2% to 3/4%. On February 1st 2017, Fed decided to maintain the target rate of federal fund rate between 1/2% and 3/4 %. On March 15th, 2017, Fed decided to raise the federal fund rate from 3/4% to 1%. On May 3rd, 2017, Fed decided to maintain the federal fund rate to 1%. On June 14th, 2017, Fed decided to raise the federal fund rate from 1% to 1.25%. Fed agrees that economic recovery is still moderate, Also Fed feels that the job market is slowly strengthening and the long term inflation signs stabilized. But Fed also feel it is necessary to maintain…arrow_forwardwhat is the formula for the rate on long-term Treasury bonds?arrow_forwardWhat are the main determinants of the federal funds rate?arrow_forward
- https://www.federalreserve.gov/newsevents/pressreleases/monetary20210317a.htm What are the factors cited in this statement that determined the FOMC’s decision of changing (or keeping constant) its target for the federal funds rate?arrow_forwardWhat is the sequence of events from a rise in the federal funds rate target range to a change in the inflation rate? Other short-term interest rates _______. A. and the long-term interest rate rise the same day B. rise the same day, but it takes a few months for the supply of loanable funds to decrease C. rise within a few weeks, but the long-run interest rate rises almost immediately D. rise the same day, but it takes a few months for the supply of loanable funds to increasearrow_forwardin depth discuss: What are the key issues in the transmission of monetary policy and explain the ways through which the monetary policy actions impact upon the economy? use any graphs as needed as necessary.arrow_forward
- If the IORB rate is 4.25 percent, the effective federal funds rate is 4.18 percent, and the ON RRP rate is 4.00 percent, which group might lend money in the federal funds market? Commercial banks None of the answer options are correct. Non-bank financial companies The Federal Reserve.arrow_forwardCalculate the Federal Funds rate for the following values of expected growth in real GDP and inflation. Assume that, as above, long-term real GDP growth is 3% and steady-state (or target) inflation is 2%. 1. Expected growth in real GDP = 5%; inflation = 5% 2. Expected growth in real GDP = 1%; inflation = 0% 3. Expected growth in real GDP = 3%; inflation = 2%arrow_forwardThe following are correct about financial intermediaries, EXCEPT? *A. Financial intermediaries are non-profit institutions which aims to help those in need of funds.B. None of the choices.C. Financial intermediaries collect interest rates from borrowers of funds.D. Financial intermediaries offer varying interest rates, and there is no such thing as a standard interest rate.E. Financial intermediaries conducts background to borrowers before granting loans.arrow_forward
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