One Reason the Target Federal Funds Rate May Not Equal

question 82

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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Definitions:

Psychological Reactance

An enthusiastic reaction towards proposals, persons, directives, or laws that intimidate or eradicate specified freedoms of behavior.

Sensory Overload

A condition where one experiences discomfort or incapacity to process the volume or intensity of incoming sensory information.

Yielding

Giving way under pressure or agreeing to the demands or opinions of others.

Anti-Smoking Beliefs

Convictions or opinions held against the act of smoking tobacco, often emphasizing the health risks and negative consequences.