The federal funds rate reflects the interest rate that banks charge each other for short-term loans. a)
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The federal funds rate reflects the interest rate that banks charge each other for short-term loans.
a) Explain why it is referred to as the “federal” funds rate.
b) At the federal funds rate of 5 percent, reserves available for borrowing fall short of demand: there is a shortage. Would you expect the federal funds rate to rise or fall? Why?
c) At the federal funds rate of 5 percent, there are more reserves available for borrowing than demanded: there is a surplus. Would you expect the federal funds rate to rise or fall? Why?
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Related Book For 
Principles Of Macroeconomics The Way We Live
ISBN: 978-1429220200
1st Edition
Authors: Susan Feigenbaum ,R. W. Hafer
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