Once the Fed decides on the interest rate it wants in the federal funds market, its most common method of achieving this rate is by
A) conducting open market operations.
B) changing reserve requirements.
C) changing tax rates.
D) altering exchange rates.

Question

Quizplus · Accepted Answer

The Fed's most common method of achieving its desired interest rate in the federal funds market is by conducting open market operations. This involves buying or selling government securities, which affects the supply of money in the economy and, in turn, the interest rate. Changing reserve requirements and tax rates are tools that the Fed can use to influence the money supply, but they are not as commonly used as open market operations. Altering exchange rates is not within the direct purview of the Fed, as it is the responsibility of the Treasury and the President.

Once the Fed Decides on the Interest Rate It Wants