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 reverse repurchase agreements 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

CThe Federal Reserve uses the interest rate on reverse repurchase agreements as a tool to help control the federal funds rate. By setting this rate at the lower end of the target range (1.00 percent) and the interest rate it pays on reserves at the higher end (1.25 percent), the Fed encourages banks to lend at rates within the target range, effectively helping to keep the federal funds rate within the desired band.

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