Explain the concept of the neutral federal funds rate in your own words, and then answer the
Question:
a. Suppose that the Federal Open Market Committee's current target for the federal funds rate is lower than the neutral federal funds rate that Fed staff economists are confident they have correctly identified. If the FOMC is convinced that the Fed staff economists are correct, what new policy strategy should the FOMC implement with its next Directive to the Trading Desk?
b. What action should the Trading Desk undertake to carry out the new FOMC policy strategy you identified in part (a)?
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Neutral federal funds It is the value of interest rate on interbank loans At an expected ...View the full answer
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