The Trading Desk is sometimes directed to ____ a sufficient amount of Treasury securities to ____ the federal funds rate to a new targeted level set by the FOMC.
A)buy; lower
B)sell; increase
C)buy; increase
D)sell; lower
E)buy; lower AND sell; increase

Question

Quizplus · Accepted Answer

The Trading Desk at the Federal Reserve can either buy Treasury securities to inject money into the banking system, lowering the federal funds rate, or sell Treasury securities to withdraw money from the banking system, increasing the federal funds rate. This dual approach allows the Federal Reserve to adjust the federal funds rate to the target set by the Federal Open Market Committee (FOMC), making option E correct.

The Trading Desk Is Sometimes Directed to ____ a Sufficient