In June 2017,the Federal Open Market Committee raised the target for the federal funds rate to a range of 1.00 to 1.25 percent.To keep the federal funds rate in this target band,the Fed set the interest rate it pays on bank reserves to
A)1.00 percent.
B)1.125 percent,the mid-point of the target range.
C)1.25 percent.
D)2.25 percent.

Question

Quizplus · Accepted Answer

The Fed sets the interest rate it pays on bank reserves to the upper end of the target range for the federal funds rate. Therefore, since the target range for the federal funds rate was raised to 1.00 to 1.25 percent in June 2017, the Fed set the interest rate it pays on bank reserves to 1.25 percent to keep the federal funds rate in this target band.

In June 2017,the Federal Open Market Committee Raised the Target