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If the Federal Reserve raises the federal funds rate, what will likely happen to certificates of deposit offered by banks?


The interest rate offered will decrease

The interest rate offered will increase

The interest rate will automatically be set to zero

The interest rate will remain the same

Verified Answer :

Greenleafable

The correct answer is The interest rate offered will increase

If they can't give out more loans, then they have to raise their interests so that they can keep earning money.

I believe the answer is: The interest rate offered will increase


In order to raises the federal funds rate, the government need to absorb larger amount of money from the people in the market.

This is why they increase the interest rate for certificate of deposit offered because it most likely attract more people to buy them due to its higher amount of interest revenue.

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