Question

For the period from the mid-1970s up through the end of 2007, Federal Reserve monetary policy can largely be summed up by looking at how it targeted the federal funds interest rate using open market operations.

(True/False)

Answer 1

The statement is true as the Federal Reserve's monetary policy from the mid-1970s up through 2007 largely involved targeting the federal funds interest rate through open market operations to manage inflation and unemployment.

Step-by-step explanation:

The statement is True. From the mid-1970s through the end of 2007, the Federal Reserve primarily used open market operations to target the federal funds interest rate. This monetary policy tool involves the buying and selling of government securities to influence the amount of money that is on deposit at Federal Reserve banks and thus to adjust the interest rates. Targeting the federal funds rate is a way to control inflation and manage unemployment levels, contributing to overall economic stability.

Various figures, such as Figure 28.10, Figure 14.10, and others, show how the Federal Reserve executed monetary policy by analyzing the relationship between the federal funds interest rate, the unemployment rate, and the inflation rate since the 1970s. These figures indicate different episodes of monetary policy that highlight the Federal Reserve's consistent focus on the federal funds rate as a central part of its economic strategy.