When the Fed wants to raise nominal interest rates, it
A)increases bank reserves.
B)orders all banks to increase interest rates.
C)recommends that Congress raise the federal funds rate.
D)recommends that Congress conduct open market operations.
E)sells government bonds.

Question

Quizplus · Accepted Answer

When the Fed wants to raise nominal interest rates, it sells government bonds through open market operations. This decreases the money supply and increases demand for the remaining bonds, therefore driving up the interest rates.

When the Fed Wants to Raise Nominal Interest Rates, It