ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Answer and Explanation: The correct answer is option c federal funds rate. Because By law, banks should keep a save reserve to a specific level of their deposits in a record at a Federal Reserve bank. The interest on interbank borrowings is said as federal fund rate.

Detailed explanation-2: -A bank borrows from another bank’s reserve if it is short of cash at the end of the day. That’s where the FFR comes in. It’s the rate that banks charge each other for overnight loans. The Fed maintained its target FFR range at 0% to 0.25% in January 2022, then increased it to 0.25% to 0.50% in March 2022.

Detailed explanation-3: -Federal fund rate refers to an interest rate that the FOMC usually determines through monetary policies. Commercial banks mainly use this interest rate to charge each other for overnight and short-term loans. These loans are meant to enable the institution to achieve its short-term financial goals and objectives.

Detailed explanation-4: -It’s set as a range between an upper and lower limit. The federal funds rate is currently 4.50% to 4.75%.

Detailed explanation-5: -The federal funds rate describes the interest rate that banks charge other banks for lending them cash (typically excess monies on hand in their reserve balances) on an overnight basis.