If the desired intermediate target is an interest rate,then the preferred operating target will be a(n)________ variable like the ________.
A) interest rate; three-month Treasury bill rate
B) interest rate; federal funds rate
C) reserve aggregate; monetary base
D) reserve aggregate; nonborrowed base

Question

Quizplus · Accepted Answer

If the desired intermediate target is an interest rate, the preferred operating target will be a related variable that the central bank can directly control. The federal funds rate is the rate at which banks lend to each other and it is a target that can be directly influenced by the central bank through open market operations. Therefore, choice B is the best choice.

If the Desired Intermediate Target Is an Interest Rate,then the Preferred