- If the Fed wants to increase the federal funds rate, it will conduct an open market operation in which it _{--------------------}government securities and thereby shifts the_{--------------------} curve _{--------------------} . A)sell; RD; leftward B)buy; RS; leftward C)sell; RS; rightward D)buy; RD; rightward E)sell; RS; leftward

Question

Quizplus · Accepted Answer

When the Fed sells government securities, it decreases the reserves in the banking system, shifting the reserve supply (RS) curve leftward, which increases the federal funds rate.

- If the Fed Wants to Increase the Federal Funds Rate