Because the Fed's current tool for changing the interest rate is to change the ________, once the decision has been made to make the change, ________.
A) rate it pays on bank reserves; the implementation lag is usually very long
B) rate it pays on bank reserves; there is in effect no implementation lag
C) required reserve rate; the implementation lag is usually very long
D) required reserve rate; there is in effect no implementation lag

Question

Quizplus · Accepted Answer

The Fed's current tool for changing the interest rate is to change the rate it pays on bank reserves. Once the decision has been made to make the change, there is in effect no implementation lag. Therefore, the best choice is B.

Because the Fed's Current Tool for Changing the Interest Rate