In order to manipulate the money supply, the Fed can change the interest rate that it pays on reserves in comparison to the ____ rate.
A)federal funds
B)prime
C)30-year fixed mortgage
D)credit card interest

Question

Quizplus · Accepted Answer

The federal funds rate is the interest rate that banks charge each other for overnight loans of their excess reserves held at the Federal Reserve. By changing the interest rate that it pays on reserves, the Fed can influence the level of reserves held by banks and thus affect the federal funds rate.

In Order to Manipulate the Money Supply, the Fed Can