To lower the federal funds rate, the Federal Reserve should

Question

Quizplus · Accepted Answer

To lower the federal funds rate, the Federal Reserve needs to increase the money supply in the economy. This can be done by purchasing government securities from banks, which increases the amount of reserves that banks have available to lend out. With more reserves available, banks can lend more money to consumers and businesses, which lowers interest rates and stimulates economic activity. Therefore, buying government securities is the best choice to lower the federal funds rate.

To Lower the Federal Funds Rate, the Federal Reserve Should