Question

The Federal Reserve influences the federal funds rate by

Select one:

a. buying and selling government securities.

b. adjusting the reserve requirement.

c. lowering the discount rate.

d. all of the above.

Answer 1

The federal reserve influences the federal funds rate by engaging itself in the open market operations, which is particularly purchase and sale of securities. As it cannot decide the interest rate directly.

Monetary policy is controlled by managing the Open market operations, the discount rate, and reserve requirements.

Securities will be purchased or sold by Fed depending on whether it wants to increase or decrease the interest rate.

Hence option A is correct