Question

The federal funds market refers to the market where​ ________. A. banks obtain loans of reserves...

The federal funds market refers to the market where​ ________.

A.

banks obtain loans of reserves from one another

B.

the Fed obtains loans of reserves from the central banks of other nations

C.

there are no predetermined rates of interest on loans and the highest bidding borrower gets the loan

D.

the federal government borrows overnight funds from the Fed

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Answer #1

If we talk in simple terms then Federal fund rate is the interest rate that is charged by one commercial bank to another commercial banks on the overnight basis and they lend their excess reserves not the required reserves

It sets Federal fund rate at least 8 times a year according to different economic conditions

It is not related with the bidding

In this the loan is exchange between the two commercial banks not the central bank or the Federal reserve Bank

So the correct answer here is is option A

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