To maintain an interest rate target the Fed must make adjustments to the money supply.

Question

Quizplus · Accepted Answer

To maintain an interest rate target, the Fed must adjust the money supply. If interest rates are too high, the Fed can increase the money supply to bring rates down. If interest rates are too low, the Fed can decrease the money supply to push rates up. This is done through open market operations, discount rate adjustments, and reserve requirement changes.

To Maintain an Interest Rate Target the Fed Must Make