The Fed can influence the federal funds rate by adjusting the level of reserves in the banking system.

Question

Quizplus · Accepted Answer

This is true. By adjusting the level of reserves in the banking system, the Fed can affect the supply and demand of funds in the overnight lending market, which in turn impacts the federal funds rate. Additionally, the Fed can also set the federal funds rate target directly through its monetary policy decisions.

The Fed Can Influence the Federal Funds Rate by Adjusting