Every six weeks,the Federal Open Market Committee (FOMC)meets to discuss how to best adjust ________ to accommodate shocks that shift the level of ________.
A)the equilibrium real interest rate;the target Fed Funds rate
B)the target Fed Funds rate;the equilibrium real interest rate
C)the 3 month T-bill rate;the inflation gap
D)target rate of inflation;money demand
E)none of the above

Question

Quizplus · Accepted Answer

The FOMC discusses how to adjust the target Fed Funds rate to accommodate shocks that shift the level of the equilibrium real interest rate. The target Fed Funds rate is the rate at which banks lend overnight balances to each other, and adjusting it can affect the overall level of interest rates in the economy. The equilibrium real interest rate is the rate that balances the supply and demand for loanable funds in the economy, and shifts in factors such as productivity, demographics, and technology can influence its level.

Every Six Weeks,the Federal Open Market Committee (FOMC)meets to Discuss