Question

While a television news reporter might state that Today the Fed lowered the federal funds rate from 5.5 percent to 5 25 percent, a more precise account of the Fed s action would be as tollows Oa Today the Fed took a step toward contracting aggregate demand, and this was done by lowering the federal funds rate to 525 percent 0b"Today te Fedlowered the discount rate by of a percentage point and te action w·force re lederainds rate to drop by the same amount 0 "Today the Fed told its bond traders to conduct open market peation, in such a way hat the eq la Lm fec e s iate ould deoene to S 25 percent Od Today the Fed took steps to decrease the money supply by an amouns that is nuficiant to decrease theedral un rale to 5 25 percent a quarter

Answer 1

While a television news reporter might state that “Today the Fed lowered the federal funds rate from 5.5 percent to 5.25 percent,” a more precise account of the Fed’s action would be as follows:“Today the Fed told its bond traders to conduct open-market operations in such a way that the equilibrium federal funds rate would decrease to 5.25 percent.”

Correct Ans - C