The primary indicator of the stance of monetary policy in the U.S. is the ________.
A) federal funds rate
B) discount rate
C) overnight rate
D) prime rate

Question

Quizplus · Accepted Answer

The Federal Reserve uses the federal funds rate as the primary indicator of its stance on monetary policy. This is the interest rate at which depository institutions lend and borrow overnight funds to maintain their reserve requirements. By setting a target for the federal funds rate, the Fed can influence the level of economic activity and inflation. Therefore, changes in the federal funds rate signal changes in the Fed's monetary policy stance.

The Primary Indicator of the Stance of Monetary Policy in the U.S