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QUESTION 32 While a television news reporter might state that Today the Fed lowered the interest rate from 1.25 percent to 0.25 percent, a more
QUESTION 32 While a television news reporter might state that "Today the Fed lowered the interest rate from 1.25 percent to 0.25 percent", a more precise account of the Fed's action would be as follows: "Today the Fed took a step toward contracting the aggregate demand, and this was done by lowering the federal funds rate to 0.25 percent." O "Today the Fed took steps to increase the money supply by printing money by an amount that is sufficient to decrease the federal funds rate to 0.25 percent" "Today the Fed told its bond traders to conduct open-market operations to buy treasury bonds so that the equilibrium federal funds rate would decrease to 0.25 percent." O "Today the Fed raised the discount rate by a quarter of a percentage point, and this action will force the federal funds rate to decrease by the same amount."
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