ECONOMICS
MONETARY POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The Federal Funds Rate
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for freaking real
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Either A or B
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None of the above
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Detailed explanation-1: -This key interest rate impacts how much commercial banks charge each other for short-term loans. A higher fed funds rate means more expensive borrowing costs, which can reduce demand among banks and other financial institutions to borrow money.
Detailed explanation-2: -If the FOMC lowered its target for the federal funds rate, then the trading desk in New York would buy securities on the open market to increase the supply of reserves. The Fed paid for the securities by crediting the reserve accounts of the banks that sold the securities.
Detailed explanation-3: -Increasing the cost of credit through the funds rate curbs demand and helps reduce inflationary pressures in the short run.
Detailed explanation-4: -The term Federal Open Market Committee (FOMC) refers to the branch of the Federal Reserve System (FRS) that determines the direction of monetary policy in the United States by directing open market operations (OMOs).