Question

For the three statements below, assert whether they are true or false. Any sort of uncertainty or anything that breaks the statement implies that you should choose false. Explain your answer. a. The only way that the Fed can affect the level of borrowed reserves is by adjusting the discount rate. b. The federal funds rate can never be above the discount rate. c. The federal funds rate can never be below the interest rate paid on reserves.

Answer 1

Answer: False; True; True.

Step-by-step explanation:

a. The only way that the Fed can affect the level of borrowed reserves is by adjusting the discount rate.

False. This is not true as the Fed can't control the borrowed reserves volume even though it is possible to encourage or discourage them to borrow reserves when the discount rate is altered.

b. The federal funds rate can never be above the discount rate.

True. The federal funds rate can never be above the discount rate

c. The federal funds rate can never be below the interest rate paid on reserves.

True. It is also true that the federal funds rate can never be below the interest rate paid on reserves.