The Fed adjusts interest rates by buying and selling bonds.

Question

Quizplus · Accepted Answer

When the Fed wants to lower interest rates, it buys bonds from banks and other financial institutions, which increases the money supply in the economy. This, in turn, lowers the cost of borrowing money and stimulates economic growth. When the Fed wants to raise interest rates, it sells bonds, which decreases the money supply and makes borrowing more expensive, thereby slowing down economic growth.

The Fed Adjusts Interest Rates by Buying and Selling Bonds