why is the federal funds rate so influential on other interest rates? a. the federal funds rate determines…
why is the federal funds rate so influential on other interest rates? a. the federal funds rate determines how much consumers can borrow per year. b. the federal funds rate determines how many loans per year a bank can issue. c. the federal funds rate is only important to heavy investors. d. the federal funds rate determines at what interest rate banks borrow money.
Answer
Brief Explanations:
The Federal Funds Rate is the interest rate at which depository - institutions (banks) lend reserve balances to other banks overnight. Since it affects the cost of borrowing for banks, it has a ripple - effect on other interest rates in the economy. When banks' borrowing costs change, they adjust the interest rates they charge customers for loans.
Answer:
d. The Federal Funds Rate determines at what interest rate banks borrow money.