Question

The Federal Reserve can influence​ long-term interest rates by

Answer 1

Long term interest rates can influenced by the Fed by using continual open market operations that will determine the interest rate threshold. For instance if the Fed wants to raise interest rates it must reduce money supply. It will do this through an open market sale. Similarly to reduce interest rates it must increase money supply and so to do so it will use open market purchases. The Fed can also use interest rate targets that it follows so that the interest rate does not fall above or below a particular level. This will preserve long term interest rates.