Respuesta :
A borrowed reserves target is procyclical because increases in income increases interest rates and discount loans, causing the fed to increase the monetary base, everything else held constant.
Borrowed Reserve Target:
Borrowed Reserves is that the difference between the liquid reserves the banks had borrowed from the Fed from the excess reserves banks held on account at the Fed (excess reserves--borrowings). This statistical data was released in weekly Federal data . Currently within the era of Fed monetary policy it has become least meaningful and is no longer published.
Correct Option:
Option A
Why correct option is A ?
Everything else held constant, a borrowed reserves target is pro-cyclical refers to the tendency of monetary variables to fluctuate around a trend during the economical cycle because increases in income increase interest rates, causing the Fed to extend the monetary base.
Why other are incorrect option:
Option B: counter-cyclical is the strategy adopted to counter boom or recession through monetary measures and it's not a correct option; even if interest rates and discount loans, and causing the Fed to increase the monetary base is correct.
Option C: pro-cyclical could be a target to borrowed reserve and reduce interest rate causing the Federal Reserve to reduce the monetary base is not as true as under pro-cyclical the interest rate increases and it causes increase in the monetary base.
Option D: A borrowed reserves target can be a pro-cyclical and counter-cyclical because increases in income increases not reduce interest rates and discount loans, causing the Fed to increases not reduces the monetary base, everything else are held constant.
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