Which of the Following Statements Is Incorrect with Respect to the Federal

question 38

Multiple Choice

Which of the following statements is incorrect with respect to the federal funds rate?

• A)It is the rate charged by financial institutions on loans they extend to each other.
• B)It is not influenced by the supply and demand for funds in the federal funds market.
• C)The federal funds rate is closely monitored by all types of firms.
• D)Many market participants view changes in the federal funds rate to be an indicator of potential changes in other money market rates.
• E)The Federal Reserve adjusts the amount of funds in depository institutions in order to influence the federal funds rate.

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