Question

Suppose that the current federal funds rate is above the federal funds target rate. In order to lower 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. Question 5 options:

Answer 1

Answer:

purchase; increase.

Explanation:

Suppose that the current federal funds rate is above the federal funds target rate. In order to lower the federal funds rate the Fed will purchase securities on the open market which will increase the supply of reserves in the market for reserves, pushing the rate closer to the target rate.