Multiple Choice
Which of the following is a formal statement of a company's plans expressed in dollar amounts?
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13. Statement of Cash Flows
Introduction to the Statement of Cash Flows
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The federal funds rate is the interest rate that _______ charge(s) _______.
A
banks; the federal government for Treasury securities
B
banks; other banks for overnight loans of reserves
C
the Federal Reserve; consumers for personal loans
D
the Federal Reserve; banks for long-term loans
Verified step by step guidance1
Understand the concept of the federal funds rate: It is the interest rate at which depository institutions (banks) lend reserve balances to other banks overnight.
Eliminate incorrect options by analyzing their definitions: For example, the federal funds rate does not involve the federal government charging banks for Treasury securities.
Focus on the correct relationship: The federal funds rate is specifically about banks lending to other banks, not the Federal Reserve lending to consumers or banks.
Clarify the time frame: The federal funds rate applies to overnight loans, which are short-term transactions between banks.
Select the correct answer: 'banks; other banks for overnight loans of reserves' aligns with the definition of the federal funds rate.
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