We discussed briefly the federal funds rate in the class. Read the Wikipedia entry"Federal funds rate" (https://en.wikipedia.org/wiki/Federal_funds_rate) and answer thefollowing questions.
(a) What is the federal funds rate?
(b) What is the federal funds target rate?
(c) What is federal funds effective rate?
(d) The Federal Open Market Committee (FOMC) uses the target Federal funds rate tomanage the US economy. Specifically, it lowers the target rate to stimulate the economyduring business recessions and raises the target rate to contain inflation during businessexpansions. John Taylor is an economics professor at Stanford University, and hesuggests that we can describe the monetary policy by a so-called Taylor Rule. Read theWikipedia entry "Taylor Rule" (https://en.wikipedia.org/wiki/Taylor_rule) and provide abrief explanation of Taylor Rule.
(e) The FOMC uses the open market operation to ensure that the effective federal fundsrate fluctuates closely around the target. You can find the historical information of theeffective federal funds rate from the database FRED maintained by the St. Louis Fed(https://research.stlouisfed.org/fred2/series/FEDFUNDS/). What is the current level ofthe effective federal funds rate?
(f) The FOMC usually decides on whether or not to change the target federal funds rateduring the pre-scheduled FOMC meetings. You can find the schedule of regular FOMCmeetings at the link https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm.What is your opinion on whether or not the FOMC should raise the target federal fundsrate at the coming September meeting and why?