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:

Future Value

The estimated value of an investment at a specific future date, taking into account factors such as interest rates and compounding.

Amortized

The process of spreading out a loan into a series of fixed payments over time, covering both principal and interest.

Outstanding Principal

The portion of a loan amount that has not yet been repaid to the lender.

Principal Repayment

The process of paying back the original amount of money borrowed, excluding interest, in a loan or bond.