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djverab [1.8K]
3 years ago
11

Distinguish between the Federal funds rate and the prime interest rate. Which of these two rates does the Fed explicitly target

in undertaking its monetary policy?
Business
1 answer:
kap26 [50]3 years ago
5 0

Answer: The Fed wanted to encourage banks to raise their prime interest rates, slowinggrowth in investment, consumption, and aggregate demand to a noninflationary pace.

Explanation:

Federal funds interest rate could be as interest rate banks charge themselves on overnight loans in order to meet reserve requirement. While prime interest are interest rates banks charge on loans to their most credit worthy customer. The Fed wanted to encourage banks to raise their prime interest rates, slowinggrowth in investment, consumption, and aggregate demand to a noninflationary pace.The tight money policy successfully raised the prime interest rate.

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Nire   has a comparative advantage in producing butter, whereas Nire   has a comparative advantage in producing guns.Consider a
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False

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A proposed trade of 12.5 pounds of butter for 20 guns may NOT be mutually agreeable to both countries.

The main idea of comparative advantage is NOT trade by barter but buying and selling. Comparative advantage is a principle that states that a country should produce more of the goods and services which it can produce at a lower opportunity cost than that of trade partners and thereafter sell to those partners at a lower cost than they would have produced it themselves in the bid to be self reliant.

It is difficult to agree to such a deal of 12.5 pounds of butter for 20 guns because it is impossible to conclude that they are even or equal in value. The both countries should sell to each other as money is a common means of exchange.

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2 years ago
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