Which of the Following Changes Is Observed When the Fed

Multiple Choice

Which of the following changes is observed when the Fed increases the federal funds rate?

A) Inflation is brought to an immediate halt.
B) The inflation rate increases for several months, but then begins to decrease.
C) Major banks try to offset the change in the federal funds rate by lowering the interest rates they charge on loans.
D) Major banks try to offset the change in the federal funds rate by lowering the interest rates they pay on savings deposits.
E) Major banks raise the prime interest rate that they charge to their best customers.