To lower the federal funds rate, the Federal Reserve should

Question

Quizplus · Accepted Answer

To lower the federal funds rate, the Federal Reserve should buy government securities. This would increase the money supply in the banking system, leading to a decrease in the federal funds rate. Raising the Treasury bill rate would have the opposite effect, as it would make borrowing more expensive and lower the money supply. Raising the exchange rate and decreasing bank reserves would have little impact on the federal funds rate.

To Lower the Federal Funds Rate, the Federal Reserve Should