Eric The Fed targets a range for the: prime rate (the rate charged to customers with the best credit history). federal funds rate (the rate one bank charges another for loans of reserves). Submit
Added by Roberto S.
Close
Step 1
federal funds rate (the rate one bank charges another for loans of reserves). Submit Show more…
Show all steps
Your feedback will help us improve your experience
Haricharan Gupta and 93 other Microeconomics educators are ready to help you.
Ask a new question
Labs
Want to see this concept in action?
Explore this concept interactively to see how it behaves as you change inputs.
Key Concepts
Recommended Videos
'For purposes of monetary policy, the Federal Reserve has targeted the interest rate known as the federal funds rate: Treasury bill rate_ discount rate: prime rate:'
Haricharan G.
Federal Funds Rate. The Federal Reserve Board sets a target $f$ for the federal funds rate, that is, the interest rate that banks charge each other for overnight borrowing of Federal funds. This target rate can be estimated by $$ f=8.5+1.4(I-U) $$ where $I$ is the core inflation rate over the preceding 12 months and $U$ is the seasonally adjusted unemployment rate. If core inflation is 0.025 and unemployment is $0.044,$ what should the federal funds rate be?
Equations, Inequalities, and Problem Solving
Formulas
The Federal Reserve sets interest rates that lending institutions pay to borrow, which is called Group of answer choices Federal Reserve rate. prime rate. discount rate. market rate.
Andrew D.
Recommended Textbooks
Principles of Economics
Principles of Microeconomics for AP® Courses
Economics
Transcript
18,000,000+
Students on Numerade
Trusted by students at 8,000+ universities
Watch the video solution with this free unlock.
EMAIL
PASSWORD