The Fed can change the federal funds rate
A) lowering taxes.
B) increasing spending.
C) purchasing government securities.
D) increasing aggregate demand.

Question

Quizplus · Accepted Answer

The Fed can change the federal funds rate by purchasing government securities. This is a tool used in open-market operations to increase the money supply and lower interest rates, which in turn can stimulate economic growth. Lower interest rates make it cheaper to borrow money, encouraging spending and investment. Lower interest rates can also decrease the exchange rate, making exports more competitive and increasing net exports.

The Fed Can Change the Federal Funds Rate