1.)One of the tools of monetary policy is to change the discount rate. Since 200

ID: 1166213 • Letter: 1

Question

1.)One of the tools of monetary policy is to change the discount rate. Since 2003

the Fed has kept the federal funds rate one percentage point above the discount rate.

the Fed has pegged the discount rate to the reserve requirement.

the Fed has not changed the discount rate.

the Fed has kept the discount rate a fixed amount above the federal funds rate.

2.) Interest rates typically rise when

the maturity date on existing bonds extends farther into the future.

bond prices increase.

the coupon payout on existing bonds increase.

bond prices decrease.

Question 1

With respect to discount rate, Fed has adopted a unique policy since 2003.

Fed has decided to fix the discount rate at 1% above the prevailing federal funds rate.

So,

The Fed has kept the discount rate a fixed amount above the federal funds rate.

Hence, the correct answer is the option (4).

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