To lower the federal funds rate, the Federal Reserve should

Question

Quizplus · Accepted Answer

In order to lower the federal funds rate, the Federal Reserve should buy government securities on the open market. This increases the reserves of banks, giving them more funds to lend out to consumers and businesses. This increased lending activity then puts downward pressure on interest rates, including the federal funds rate. The other choices (B, C, and D) would actually have the opposite effect, potentially raising interest rates instead of lowering them.

To Lower the Federal Funds Rate, the Federal Reserve Should