2007, Question 2 · 6 points
Targeting the federal funds rate
Define the federal funds rate, choose the open market operation that lowers it, compute the largest change in loans for a given reserve ratio, and explain the effects on nominal and real interest rates.
This exam had three free-response questions with a 10 minute planning period and 50 minutes of writing, and students were told to spend about half the time on Question 1 and split the rest evenly between Questions 2 and 3. The current exam has 3 free-response questions in 60 minutes. The skills these questions practice still count.
Lessons this question draws on
1 Read the question
The question is College Board's, from the 2007 exam. It starts on page 3 of the PDF. College Board no longer posts this exam, so it opens from the copy of College Board's PDF that the Internet Archive saved on June 23, 2024.
2 Write your answer
Answer each part the way you would on the exam, in full sentences, with your work shown. Your writing saves as you type.
3 Score it
Score your answer against College Board's scoring guidelines, one point at a time. Give yourself a point only when your answer says what the guideline asks for.
Scoring guidelines (PDF, page 4)
Question, scoring guidelines and Chief Reader report: College Board, from the Internet Archive. The title, summary are ours.