The Fed can decrease the federal funds rate by

Question

Quizplus · Accepted Answer

The Fed can lower the federal funds rate by buying government bonds, which increases the money supply and causes market interest rates to fall. This is the most common method used by the Fed to lower interest rates. Selling government bonds would have the opposite effect, causing interest rates to rise. While the Fed may announce a lower rate, this alone would not cause rates to decrease if market forces are pushing them higher. Changing the money multiplier requires more complicated actions by the Fed, such as adjusting reserve requirements or discount rates, and is not as commonly used to directly impact interest rates.

The Fed Can Decrease the Federal Funds Rate by