Question

15. The Fed directly sets

a. the prime interest rate but not the federal funds rate.

b. both the federal funds rate and the prime interest rate.

c. neither the federal funds rate nor the prime interest rate.

d. the discount rate and the prime interest rate.

20. Since the financial crisis of 2007-2009, borrowing at the federal funds rate

a. has dropped significantly because the rate has increased.

b. has replaced open-market operations as the most frequently used tool of monetary policy.

c. virtually never happens, as most banks have sufficient excess reserves.

d. has increased significantly, as banks struggle to maintain enoguh reserves.

Answer 1

Q15.

c. Fed directly sets neither the federal funds rate nor the the prime interest rate. Many banks chooses to set their prime rate based partly on the target level of the federal fund rate.

Q20.

b. has replaced open market operations as the most frequently used tool of monetary policy.