Suppose that the current federal funds rate is above the federal funds target rate.In order to lower the federal funds rate the Fed will ________________ securities on the open market which will ________________ the supply of reserves in the market for reserves,pushing the rate closer to the target rate.
A) sell; increase
B) purchase; increase
C) purchase; decrease
D) sell; decrease

Question

Quizplus · Accepted Answer

The Federal Reserve purchases securities on the open market to increase the supply of reserves in the banking system. This action puts downward pressure on the federal funds rate, moving it closer to the target rate.

Suppose That the Current Federal Funds Rate Is Above the Federal