Discuss the relationship between a federal funds target and a federal funds equilibrium rate. If the...

Discuss the relationship between a federal funds target and a federal funds equilibrium rate. If the target is greater than the equilibrium rate, what happens? If the target is below the equilibrium rate, what happens? Can the Fed set the federal funds rate (or any other interest rate) independent from market supply and demands for funds?

Expert Solution

Rahul Sunny answered 2 years ago

1. What is the relationship between the federal funds rate and Inflation? 2. if the graph...

1. What is the relationship between the federal funds rate and Inflation? 2. if the graph of federal rates is in recession, is the inflation graph in expansion? 3. How about vice versa? Please explain with definitions and examples from the US economy. This can be answered as a paragraph. Thank you.

Suppose that the Federal Reserve sets its target for the federal funds rate at a range...

Suppose that the Federal Reserve sets its target for the federal funds rate at a range of 0.25 to 0.50 percent. This means that the discount rate on primary loans will be set at ____ percent and the discount rate on secondary loans will be set at ___ percent. 1.00; 1.50 1.00; 0.50 0.50; 1.00 1.25; 1.50 1.50; 1.00 2. Which of the following is an example of an operating target that can potentially be used by the federal reserve?...

(3) On March 15, 2020, the Federal Reserve lowered its target for the federal funds rate...

(3) On March 15, 2020, the Federal Reserve lowered its target for the federal funds rate to a range of 0% to 0.25%. Please answer the following questions: (a) What is the difference between the federal funds rate and the discount rate? Which does the Federal Reserve actually control? (b) Why does a lower federal funds rate incentivize lending and why might that be a goal that the Federal Reserve currently has?

what is the difference between the Libor rate and the federal funds rate?

1. Suppose the Federal Reserve raises its target for the federal funds rate while interest rates...

1. Suppose the Federal Reserve raises its target for the federal funds rate while interest rates in other countries do not change. The result will be a. an outflow of financial capital, a decrease in demand for U.S. dollars, and a depreciation of the U.S. dollar. b. an inflow of financial capital, a decrease in demand for U.S. dollars, and a depreciation of the U.S. dollar. c. an inflow of financial capital, an increase in demand for U.S. dollars, and...

Explain/Discuss the following concepts: - The discount rate and the federal funds rate

state the taylor rule for choosing a target federal funds rate. if current inflation is 5%...

state the taylor rule for choosing a target federal funds rate. if current inflation is 5% and target inflation equals 2% and current output is 1% and potential output is 3%, what should the fed do according to the taylor rule? dicuss, including an indication of thr effect on the economy.

What is the federal funds rate? Would you classify the federal funds rate as a policy...

What is the federal funds rate? Would you classify the federal funds rate as a policy instrument, and operating target, an intermediate target, or a policy goal? Explain.

Use the following information for a Taylor rule. The equilibrium real federal funds rate is 2%,...

Use the following information for a Taylor rule. The equilibrium real federal funds rate is 2%, the inflation target is 2% and the (real) output growth target is 3%. a) If actual inflation is 3% and actual output growth is 4%, find the federal funds rate recommended by the Taylor rule. b) If actual inflation is 1% and actual output growth is 1%, find the federal funds rate recommended by the Taylor rule. How do these numbers compare with the actual...

7) Explain why the equilibrium federal funds rate cannot rise above the discount rate. Draw a...

7) Explain why the equilibrium federal funds rate cannot rise above the discount rate. Draw a graph of the supply and demand for reserves where there is discount lending.

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