If the federal funds rate is below its target, the Fed is likely to_____ securities in the open market, which will cause the federal funds rate to_____ .
A)buy; increase
B)buy; decrease
C)sell; decrease
D)sell; increase

Question

If the federal funds rate is below its target, the Fed is likely to_____ securities in the open market, which will cause the federal funds rate to_____ .
A)buy; increase 
B)buy; decrease
C)sell; decrease
D)sell; increase

Quizplus · Accepted Answer

Selling securities in the open market will decrease the amount of reserves banks have available to lend to one another, which typically leads to an increase in the federal funds rate, aligning it closer to its target.

If the Federal Funds Rate Is Below Its Target, the Fed