Ther Fed creates a lower and upper bound for the federal funds rate and the incentives that drive financial institutions to move the federal funds market to that target. a. Select the tool(s) the Fed uses to incentivize financial institutions to move the federal funds market to the targeted federal funds rate. The Fed buys and sells government bonds. borrows money overnight from financial institutions. pays banks interest on excess reserves. lends directly to banks through the discount window.
Ther Fed creates a lower and upper bound for the federal funds rate and the incentives that drive financial institutions to move the federal funds market to that target. a. Select the tool(s) the Fed uses to incentivize financial institutions to move the federal funds market to the targeted federal funds rate. The Fed buys and sells government bonds. borrows money overnight from financial institutions. pays banks interest on excess reserves. lends directly to banks through the discount window.
Chapter1: Making Economics Decisions
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Transcribed Image Text:Ther Fed creates a lower and upper bound for the federal funds rate and the incentives that drive financial institutions to move
the federal funds market to that target.
a. Select the tool(s) the Fed uses to incentivize financial institutions to move the federal funds market to the targeted federal
funds rate.
The Fed
buys and sells government bonds.
borrows money overnight from financial institutions.
pays banks interest on excess reserves.
lends directly to banks through the discount window.
Transcribed Image Text:b. Select the tool(s) the Fed uses to create a lower bound for the federal funds rate.
The Fed
pays banks interest on excess reserves.
lends directly to banks through the discount window.
c. Select the tool(s) the Fed uses to create an upper bound for the federal funds rate.
The Fed
borrows money overnight from financial institutions.
borrows money overnight from financial institutions.
pays banks interest on excess reserves.
lends directly to banks through the discount window.
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