If the Target Federal Funds Rate Reaches the Lower Bound

question 52

Multiple Choice

If the target federal funds rate reaches the lower bound the FOMC:

• A) must stop purchasing securities since they cannot lower nominal rates below the lower bound.
• B) would likely shift their focus to purchasing longer-term securities.
• C) would likely raise the required reserve rate.
• D) would likely raise the discount rate.

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Definitions:

Honduras

A country in Central America, characterized by its diverse landscapes, cultures, and history, but also known for its challenges with poverty and violence.

Nicaragua

A country located in Central America, known for its significant geographical diversity, ranging from lakes and volcanoes to rainforests and beaches.

Comparative Advantage

Refers to the ability of a country or individual to produce a particular good or service at a lower opportunity cost than its trading partners.

Specialized

Having expertise or focusing on a specific area of knowledge, function, or skill.