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What is the federal funds rate?

Posted on April 14, 2014 at 5:35 PM

The federal funds rate is an interest rate that the Federal Reserve (the central bank) targets through open market operations. The Federal Open Market Committee meets every six weeks to determine the federal funds rate. Traditionally, when the Fed lowers the federal funds rate, money supply increases, interest rates fall, investment and consumption increase, aggregate demand increases, real GDP increases, price level increases, and unemployment falls.

AP Macroeconomics Unit 4 Monetary Policy

Categories: AP Macroeconomics, Macro Unit 4 Monetary Policy

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