If the Fed Lowers Its Target for the Federal Funds

question 14

Multiple Choice

If the Fed lowers its target for the federal funds rate,this indicates that

• A)the Fed is pursuing an expansionary monetary policy.
• B)the Fed is pursuing a contractionary monetary policy.
• C)the Fed is attempting to combat inflation.
• D)the Fed is concerned that the growth in aggregate demand will exceed potential GDP.

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Definitions:

Reserve Requirements

Regulations set by central banks requiring commercial banks to hold a certain percentage of their deposits in reserve as cash in their vaults or as deposits with the central bank.

President of the United States

The head of state and head of government of the United States, elected to a four-year term and serving as the executive leader of the federal government and commander-in-chief of the United States Armed Forces.

Board of Governors

The Board of Governors is the executive leadership of a central bank or other regulatory institution responsible for setting policies, overseeing operations, and guiding the organization’s objectives.

Board of Governors

The leading body of a central bank or other regulatory institution, responsible for overseeing its operations and making key decisions.