In 2002, the Federal Reserve Changed Its Discount Lending Procedures

question 107

Multiple Choice

In 2002, the Federal Reserve changed its discount lending procedures.Which of the following statements is correct?

• A)For most of its history the Federal Reserve has lent reserve to banks at a rate equal to the target federal funds rate; after 2002 the rate would be below the target federal funds rate.
• B)The changes made in 2002 have made it more difficult for the Fed to meet its interest-rate stability objective.
• C)Before 2002 the Fed discouraged banks from borrowing and actually destabilized the interbank market for reserves.
• D)The Fed now controls the quantity of credit extended as well as its price.

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Definitions:

Income Increases

A rise in the amount of money received, especially on a regular basis, for work or through investments, which can impact consumption, savings, and overall economic well-being.

Quantity Demanded

The specific amount of a product that consumers are willing to buy at a given price, holding all other factors constant.

Demand Curve

A graphical representation showing the relationship between the price of a good and the quantity demanded.

Complements

Goods that are often used together, where an increase in demand for one leads to an increase in demand for the other.