In order to raise the federal funds rate, the Fed ________ government securities in open market operations, so that banks' reserves ________ and the quantity of money ________.

Question

Quizplus · Accepted Answer

When the Fed sells government securities, it takes money out of the banking system, reducing banks' reserves. This decrease in reserves leads to a decrease in the quantity of money, which helps to raise the federal funds rate.

In Order to Raise the Federal Funds Rate, the Fed