To change the federal funds rate, the Fed
A)changes the income tax rate on interest income.
B)increases or removes money from the stock market.
C)coordinates with banks on establishing the new rate.
D)tells banks how much to charge.
E)uses open market operations to change the quantity of reserves.

Question

Quizplus · Accepted Answer

The Federal Reserve uses open market operations, which involve buying or selling government securities, to influence the quantity of reserves in the banking system, thereby affecting the federal funds rate.

To Change the Federal Funds Rate, the Fed