To change the federal funds rate, the Fed

Question

Quizplus · Accepted Answer

The Fed uses open market operations to buy or sell government bonds, which affects the supply of money in the economy and ultimately changes the federal funds rate. The other choices are incorrect as the Fed does not directly tell banks how much to charge (A), coordinate with banks on establishing the new rate (B), remove money from the stock market (C), or change the income tax rate on interest income (E) to change the federal funds rate.

To Change the Federal Funds Rate, the Fed