Question

. In recent years, the Fed often communicated its intentions to restrict or expand monetary policy by announcing a change in targets for the:

A. Exchange rate
B. Federal funds rate
C. Prime interest rate
D. Consumer price index

Answer 1

The correct answer to the question is B. Federal funds rate.

Step-by-step explanation:

The Fed often communicates its intentions to restrict or expand monetary policy by announcing a change in targets for the federal funds rate. The federal funds rate is the interest rate at which depository institutions lend funds to each other overnight. By adjusting this rate, the Fed can influence borrowing costs and overall economic activity.

For example, when the Fed wants to stimulate economic growth, it may lower the federal funds rate to encourage borrowing and spending. On the other hand, if the Fed wants to slow down inflation, it may raise the federal funds rate to make borrowing more expensive.