What is the relationship between the Federal funds rate and the prime interest rate? Why doesn’t the Federal Reserve target the prime interest rate?
What will be an ideal response?
The prime interest rate is the rate that banks charge their most creditworthy customers. It is a benchmark rate for banks. Other rates are based on it. It rises and falls with the Federal funds rate. When the Federal Reserve seeks to increase or decrease the Federal funds rate, it winds up increasing or decreasing the prime interest rate, and thus influencing the whole economy. The Federal funds rate is easier for the Federal Reserve to influence immediately given its direct control over bank reserves. The Federal funds rate is set by the market for excess bank reserves.
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The part of a corporation's net income that is paid out to the stockholders is
a. preferred stock b. bonds c. interest payments d. dividends e. reinvested profit
In contrast to a tariff, a quota does not
A) reduce consumers' surplus. B) increase producers' surplus. C) generate revenues for government. D) raise price. E) c and d
The demand for good X will be more elastic than the demand for good Y when
A. good X accounts for a larger percentage of a typical consumer's budget than good Y. B. consumers have more time to adjust to a change in the price of good X than they have time to adjust to a change in the price of good Y. C. good X has fewer substitutes than good Y. D. both b and c E. all of the above
The basic determinants of labor inputs (total hours of work) include:
A. the quantity and quality of capital and human resources. B. education and training, and allocative efficiency. C. economies of scale and technological advance. D. the size of the labor force and average hours of work.