When the Federal Reserve conducts monetary policy,the Federal Reserve usually focuses on:
A) M1.
B) M2.
C) the Federal Funds rate.
D) the discount rate.

Question

Quizplus · Accepted Answer

The Federal Reserve typically focuses on controlling the Federal Funds rate, which is the interest rate that banks charge each other for overnight loans. This rate serves as a benchmark for other interest rates in the economy and has a significant impact on economic activity. While the Fed does pay attention to money supply measures like M1 and M2, it primarily uses the Federal Funds rate as its primary tool for monetary policy. The discount rate, which is the rate at which banks can borrow directly from the Fed, is also used in monetary policy, but it is typically less important than the Federal Funds rate.

When the Federal Reserve Conducts Monetary Policy,the Federal Reserve Usually