Asked by Theodore Nguyen on Mar 10, 2024



Over the past 40 years,the most frequent target for the Fed's monetary policy has been the:

A) prime interest rate.
B) federal funds rate.
C) M1 money supply.
D) M2 money supply.
E) required reserve ratio.

Fed's Monetary Policy

The strategies employed by the Federal Reserve System to regulate the amount of money in circulation and influence interest rates to achieve economic objectives like controlling inflation or stimulating growth.

Federal Funds Rate

The interest rate at which banks lend reserve balances to other banks overnight, which is determined by the Federal Reserve in the U.S.

M1 Money Supply

A classification within the money supply encompassing all tangible forms of money such as currency and coins, alongside demand deposits and additional liquid assets owned by the central bank.

  • Gain insight into the effect of monetary policy on the total demand, total supply, and the rate at which banks lend to each other overnight.

Verified Answer

Benjamin Davis

Mar 10, 2024

Final Answer :
Explanation :
The Federal Reserve's most frequent target for monetary policy over the past 40 years has been the federal funds rate, which is the rate at which banks lend their excess reserves to each other overnight. The Fed sets a target rate for the federal funds rate and uses various tools to influence the market rate to move towards the target rate, in order to achieve its monetary policy goals of price stability and maximum employment.