How FED funds rate relate linked to open market operations?
Ans:
FED funds rate is the interest rate at which depository institutions lend balance reserves on overnight basis to other banks.Open market operations is a technique federal reserve uses to adjust the federal funds rate.
Using open market operations federal reserve buys and sells government securities with which money supply is manipulated.The two policies used are expansionary monetary policy and contractionary monetary policy.Using expansionary monetary policy federal funds rate is decreased and contractionary monetary policy is used when federal funds rate need to be increased.
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