-In Figure 15.3,the Fed can change the equilibrium interest rate from 2 percent to 6 percent by

Question

Quizplus · Accepted Answer

Raising the discount rate increases the cost of borrowing for banks from the Fed, leading to a decrease in the money supply and an increase in the equilibrium interest rate. Buying bonds in the open market and decreasing the reserve requirement both increase the money supply and decrease the interest rate, so they would not achieve the desired outcome of raising the equilibrium interest rate to 6 percent.