Final answer:
The optimal interest rate for the Federal Reserve to target is determined by economic conditions and monetary policy goals. It can change over time to influence borrowing costs, economic growth, and inflation.
Step-by-step explanation:
The optimal interest rate for the Federal Reserve to target is based on various factors and is determined by the current economic conditions. The Federal Reserve uses the federal funds rate as its target interest rate, which is the rate at which banks lend to each other overnight. The Fed adjusts this rate to influence borrowing costs, economic growth, and inflation.For example, during a recession, the Fed may lower interest rates to stimulate borrowing and spending, which can help boost the economy. Conversely, during periods of high inflation, the Fed may increase interest rates to reduce borrowing and control inflation.It's important to note that the optimal interest rate is not a fixed number and can change over time based on economic conditions and monetary policy goals.