To conduct monetary policy the Fed can target

Question

Quizplus · Accepted Answer

The Fed can target either the federal funds rate or the monetary base to conduct monetary policy. Targeting the federal funds rate involves adjusting the supply of reserves in the banking system to influence the interest rate at which banks lend to each other overnight. Targeting the monetary base involves buying or selling government securities to directly increase or decrease the amount of reserves in the banking system. Both options allow the Fed to influence overall economic conditions through changes in interest rates and the availability of credit.

To Conduct Monetary Policy the Fed Can Target