If the desired intermediate target is an interest rate,the preferred policy instrument would be
A)the federal funds rate.
B)the monetary base.
C)nonborrowed reserves.
D)borrowed reserves.
E)the discount rate.

Question

Quizplus · Accepted Answer

The federal funds rate is the interest rate at which banks lend reserves to each other overnight. By targeting this rate, the central bank can indirectly influence other interest rates in the economy. The monetary base, nonborrowed reserves, borrowed reserves, and the discount rate are not direct interest rate targets and are not as efficient in achieving the desired intermediate target.

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