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:

Knowledge

The understanding, awareness, or familiarity gained through experience or study.

Observation

Observation involves carefully watching, listening, and noting the characteristics or behavior of a subject or phenomenon without direct interaction or manipulation.

Systematic Tests

Systematic tests are structured methods used to evaluate or measure specific characteristics, abilities, or processes in a consistent and standardized manner.

Hypotheses

Proposed explanations for a phenomenon, made as a starting point for further investigation, that can be tested by experimentation or observation.