A news website might have this headline: “Today the Fed lowered the federal funds rate from 5.5 percent to 5.25 percent.” A more detailed account of the Fed’s action would say: “Today the Fed told its bond traders to sell enough bonds in open-market operations to make the federal funds rate decrease to 5.25 percent.” “Today the Fed lowered the discount rate by a quarter of a percentage point, and this action will force the federal funds rate to drop by the same amount.” “Today the Fed took steps to decrease the money supply by an amount that is sufficient to decrease the federal funds rate to 5.25 percent.” “Today the Fed told its bond traders to buy enough bonds in open-market operations to make the federal funds rate decrease to 5.25 percent.”
A news website might have this headline: “Today the Fed lowered the federal funds rate from 5.5 percent to 5.25 percent.” A more detailed account of the Fed’s action would say: “Today the Fed told its bond traders to sell enough bonds in open-market operations to make the federal funds rate decrease to 5.25 percent.” “Today the Fed lowered the discount rate by a quarter of a percentage point, and this action will force the federal funds rate to drop by the same amount.” “Today the Fed took steps to decrease the money supply by an amount that is sufficient to decrease the federal funds rate to 5.25 percent.” “Today the Fed told its bond traders to buy enough bonds in open-market operations to make the federal funds rate decrease to 5.25 percent.”
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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A news website might have this headline: “Today the Fed lowered the federal funds rate from 5.5 percent to 5.25 percent.” A more detailed account of the Fed’s action would say:
- “Today the Fed told its bond traders to sell enough bonds in open-market operations to make the federal funds rate decrease to 5.25 percent.”
- “Today the Fed lowered the discount rate by a quarter of a percentage point, and this action will force the federal funds rate to drop by the same amount.”
- “Today the Fed took steps to decrease the money supply by an amount that is sufficient to decrease the federal funds rate to 5.25 percent.”
- “Today the Fed told its bond traders to buy enough bonds in open-market operations to make the federal funds rate decrease to 5.25 percent.”
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