Which of the Following Is an Accurate Description of the Steps

question 47

Multiple Choice

Which of the following is an accurate description of the steps by which the FOMC causes the actual federal funds rate to rise into its target range when it votes to raise the federal funds rate target?

• A) IOER is increased → this affects depository institutions that can borrow and lend in the federal funds market AND are paid interest on their deposits with the Fed → this pushes the federal funds rate to the top of the target range → federal funds rate rises into this new range.
• B) IOER is decreased → this affects depository institutions that can borrow and lend in the federal funds market AND are paid interest on their deposits with the Fed → this keeps the federal funds rate above the bottom of the target range → federal funds rate rises into this new range.
• C) IOER is increased → this affects depository institutions that can borrow and lend in the federal funds market BUT ARE NOT paid interest on their deposits with the Fed → this pushes the federal funds rate to the top of the target range → federal funds rate rises into this new range.
• D) IOER is decreased → this affects depository institutions that can borrow and lend in the federal funds market BUT ARE NOT paid interest on their deposits with the Fed → this keeps the federal funds rate above the bottom of the target range → federal funds rate rises into this new range.

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Definitions:

Flynn Effect

The rise in average IQ scores that has occurred over the decades in many nations.

IQ Scores

Numerical measures of intelligence relative to one's age group, derived from standardized tests.

Past Century

Referring to the last hundred years from the current point in time.

Central Government

The political authority that governs an entire nation or country, as opposed to local or state governments.