Which of the following statements is incorrect with respect to the federal funds rate?
A) It is the rate charged by financial institutions on loans they extend to each other.
B) It is the interest rate in which the Federal Reserve charges on loans that it provides to commercial banks.
C) Commercial banks are the most active participants in the federal funds market.
D) Financial market participants view changes in the federal funds rate as an indicator of potential changes in other money market rates.
E) The Federal Reserve adjusts the amount of funds in depository institutions in order to influence the federal funds rate.
Correct Answer:
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