The Federal Reserve ________.
A)sets the federal funds rate once a year
B)controls the interest rate in the short run
C)controls the interest rate in the long run
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

The Federal Reserve controls the interest rate in the short run by setting the federal funds rate, which is the rate at which banks lend to each other overnight. However, this rate is adjusted by the Federal Reserve several times a year, so it is not only set once a year. The Federal Reserve's control over the interest rate in the long run is limited due to various factors such as global market conditions and economic growth. Therefore, options C, D, and E are not entirely accurate.