The rate determined in the federal funds market is the major factor that influences the rate paid on all other private money market instruments.

Question

Quizplus · Accepted Answer

The federal funds rate serves as a benchmark rate for all other short-term interest rates in the money market, including the rates paid on commercial paper, certificates of deposit, and Treasury bills. Therefore, changes in the federal funds rate have a significant impact on the rates paid on these other instruments.

The Rate Determined in the Federal Funds Market Is the Major