Suppose that the current federal funds rate is below the federal funds target rate.In order to raise the federal funds rate the Fed will ________________ securities on the open market which will ________________ the supply of reserves in the market for reserves,pushing the rate closer to the target rate.
A) sell; increase
B) purchase; increase
C) purchase; decrease
D) sell; decrease

Question

Quizplus · Accepted Answer

Selling securities on the open market decreases the supply of reserves in the market for reserves, which puts upward pressure on the federal funds rate, moving it closer to the target rate.

Suppose That the Current Federal Funds Rate Is Below the Federal