Question

Suppose the Fed raises the target for the federal funds rate from 2% to 2.75%. This change of (0.0075/0.375/0.27/0.75) percentage points means that the Fed raised its target by approximately (27.27%/0.75%/37.5%/75%)

Answer 1

Answer: 0.75% and 37.5%

Explanation:

Given that,

Fed raise the target for the federal funds rate = 2% to 2.75%

Federal fund rate is the interest rate that is charged by the fed from other banks for lending an amount on an overnight basis.

Therefore, there is a change of 0.75% points.

This means that fed raised its target by,

= $\frac{0.75}{2} \times100$

= $\frac{75}{2}$

= 37.5%

Therefore, option (C) is correct.