9 On October 30, 2019, the FOMC lowered its target rate for the federal funds rate. As part of its announcement of thepolicy change, the FOMC stated that it was lowering the interest rate it paid on reserve balances from 1.80% to 1.55%and the interest rate it offered on reverse repurchase agreements from 1.70% to 1.45%.Briefly explain why in lowering its target for the federal funds rate, the FOMC had to lower these other two interest rates.O A. Banks lose money when the Fed lowers the FFR, so in order to maintain profitability in the banking system, theFed had to lower these other two rates to increase bank revenue.B. When the Fed changes the FFR, it only impacts commercial banks, so in order to be fair and lower rates fornonbank entities, it had to adjust these other two rates.C. Banks had been holding large amounts of excess reserves, making open market operations less effective atchanging the FFR, so the Fed began using these two rates instead to influence the FFR.D. If the Fed lowered the FFR without lowering these other two rates, it would cause banks to become less liquid,making them more unstable.C2.5-2.4-2.3-2.2-2.1-2-1.9-1.8-1.7-1.6-1.5-1.4-Federal funds rateDReserves, RSTopBottomOLy

Here, it is given that the Federal Reserve changes Federal funds rate in the market. At the same…

On October 30, 2019, the FOMC lowered its target rate for the federal funds rate. As part of its announcement of the policy change, the FOMC stated that it was lowering the interest rate it paid on reserve balances from 1.80% to 1.55% and the interest rate offered on reverse repurchase agreements from 1.70% to 1.45%. Briefly explain why in lowering its target for the federal funds rate, the FOMC had to lower these other two interest rates. O A. Banks lose money when the Fed lowers the FFR, so in order to maintain profitability in the banking system, the Fed had to lower these other two rates to increase bank revenue. OB. When the Fed changes the FFR, it only impacts commercial banks, so in order to be fair and lower rates for nonbank entities, it had to adjust these other two rates. OC. Banks had been holding large amounts of excess reserves, making open market operations less effective at changing the FFR, so the Fed began using these two rates instead to influence the FFR. OD. If the Fed lowered the FFR without lowering these other two rates, it would cause banks to become less liquid, making them more unstable. 2.5- 2.4- 2.3- 2.2- 2.1- 2- 1.9- 1.8- 1.7- 1.6- 1.5- 1.4- Federal funds rate D Reserves, R. Top Bottom Q G

On October 30, 2019, the FOMC lowered its target rate for the federal funds rate. As part of its announcement of the policy change, the FOMC stated that it was lowering the interest rate it paid on reserve balances from 1.80% to 1.55% and the interest rate offered on reverse repurchase agreements from 1.70% to 1.45%. Briefly explain why in lowering its target for the federal funds rate, the FOMC had to lower these other two interest rates. O A. Banks lose money when the Fed lowers the FFR, so in order to maintain profitability in the banking system, the Fed had to lower these other two rates to increase bank revenue. OB. When the Fed changes the FFR, it only impacts commercial banks, so in order to be fair and lower rates for nonbank entities, it had to adjust these other two rates. OC. Banks had been holding large amounts of excess reserves, making open market operations less effective at changing the FFR, so the Fed began using these two rates instead to influence the FFR. OD. If the Fed lowered the FFR without lowering these other two rates, it would cause banks to become less liquid, making them more unstable. 2.5- 2.4- 2.3- 2.2- 2.1- 2- 1.9- 1.8- 1.7- 1.6- 1.5- 1.4- Federal funds rate D Reserves, R. Top Bottom Q G

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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