If the Fed wants a tighter monetary policy, it might:

Question

Quizplus · Accepted Answer

When the Federal Reserve wants to implement a tighter monetary policy, it sells government securities. This action reduces the amount of money banks have available to lend, which in turn increases the federal funds rate. The federal funds rate is the interest rate at which banks lend reserves to each other overnight. By increasing this rate, the Fed makes borrowing more expensive, which can slow down economic activity and reduce inflation.

If the Fed Wants a Tighter Monetary Policy, It Might