One Reason the Target Federal Funds Rate May Not Equal

question 40

Multiple Choice

One reason the target federal funds rate may not equal the actual federal funds rate is because:

• A)there is no way that the Fed could keep the actual rate at the target rate.
• B)the target rate changes with the demand for reserves.
• C)attaining the target rate involves forecasting reserve demand and forecasts are subject to error.
• D)none of the answers is correct; the target and the actual federal funds rates are always equal.

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