The Fed targets the interest rate by which of the following?
A)by targeting the federal funds rate
B)through the use of open market operations
C)by adjusting government spending and taxes
D)Both a and b are correct.

Question

Quizplus · Accepted Answer

The Fed targets the interest rate by both targeting the federal funds rate and through the use of open market operations. The federal funds rate is the interest rate at which banks lend to each other overnight, and the Fed influences this rate by setting a target and adjusting its policy tools accordingly. Open market operations involve the buying or selling of government securities to adjust the supply of money and thus influence interest rates. Therefore, both options a and b are correct.

The Fed Targets the Interest Rate by Which of the Following