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If the Federal Reserve lowers the target federal funds rate,

Asked 6 months ago
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1
a. liquidity in the banking system is increased
b. the discount rate rises
c. securities prices fall
d. required reserves are decreased

1 Answer

2

Answer:

a. liquidity in the banking system is increased

Explanation:

Federal fund rate is the rate of interest where a depository institution lends the money that is maintained at the federal reserve for other depository institution. It would be applied to the creditworthy institution who is very creditworthy for the loans i.e. overnight

Now in the case when the federal reserve reduce the fund rate of target federal so the possibility of borrowing would be cheaper that rise the liquidity

Hence, the option a is correct

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Luna Murazik
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answered 6 months ago

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