Question

The federal funds rate is the a. percentage of face value that the Federal Reserve is willing to pay for Treasury Securities. b. percentage of deposits that banks must hold as reserves. c. interest rate at which the Federal Reserve makes short-term loans to banks. d. interest rate at which banks lend reserves to each other overnight.

Answer 1

d. interest rate at which banks lend reserves to each other overnight.

Step-by-step explanation:

Federal fund rates are the rates at which the bank lend each other overnight in the market, as the reserves fall the federal fund rate fall and as the reserves increase the federal fund rate increases.