Through its ________ that lower or raise the level of excess reserves in the banking system, the Fed will often change the fed funds rate as part of its effort to change the rate of activity in the country's economy.

Question

Quizplus · Accepted Answer

Open market operations involve the buying or selling of government securities by the Fed in order to influence the level of excess reserves in the banking system. This, in turn, affects the fed funds rate, which is the interest rate that banks charge each other for overnight loans of these excess reserves. Changing the fed funds rate is one of the primary ways that the Fed tries to manage economic activity. The other answer choices are not accurate descriptions of the Fed's actions.

Through Its ________ That Lower or Raise the Level of Excess