If the Fed Lowers Its Target for the Federal Funds

question 14

Multiple Choice

If the Fed lowers its target for the federal funds rate,this indicates that

• A)the Fed is pursuing an expansionary monetary policy.
• B)the Fed is pursuing a contractionary monetary policy.
• C)the Fed is attempting to combat inflation.
• D)the Fed is concerned that the growth in aggregate demand will exceed potential GDP.

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Definitions:

Rate

The percentage at which interest is charged or paid, or a measure of change over time.

Compound-Interest

Interest on a loan or deposit calculated based on both the initial principal and the accumulated interest from previous periods.

Canada Savings Bond

A financial product offered by the Government of Canada that provides a competitive, fixed interest rate over a specified period.

Redeemed

The act of exchanging a financial security or coupon for cash or the value promised.