In the short run, if the Fed wants to raise the federal funds rate, it
A)instructs large commercial banks to sell government securities in the open market.
B)instructs the New York Fed to sell government securities in the foreign exchange market.
C)tells large commercial banks to raise their interest rates.
D)instructs the New York Fed to buy government securities in the open market.
E)instructs the New York Fed to sell government securities in the open market.

Question

Quizplus · Accepted Answer

The Fed raises the federal funds rate by selling government securities in the open market, which decreases the money supply and increases interest rates.

In the Short Run, If the Fed Wants to Raise