If the Target Federal Funds Rate Reaches Zero the FOMC

question 72

Multiple Choice

If the target federal funds rate reaches zero the FOMC:

• A)must stop purchasing securities since they cannot lower nominal rates below zero.
• 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:

Total Lung Capacity (TLC)

Refers to the maximum amount of air the lungs can hold after a maximum inhalation effort.

Inspiratory Capacity (IC)

The maximum volume of air that can be inhaled after a normal exhalation.

Functional Residual Capacity (FRC)

The volume of air remaining in the lungs after a normal exhalation.

Inspiratory Reserve Volume (IRV)

The highest volume of air that one can breathe in following a regular breath.