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Suppose that the Fed is concerned about inflation and decides to increase the federal funds rate...

Suppose that the Fed is concerned about inflation and decides to increase the federal funds rate by 50 basis points, the Fed will buy securities through their traders from the large commercial banks.

True

False

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Answer #1

When the Federal Reserve will be increasing the federal funds rate by 50 basis point,it will mean that it is trying to counter the inflation by decreasing the amount of money flow into the economy and it will be selling the security through the traders because when it will be selling the securities, the bank will have to buy the securities and money flow into the economy would be lower, because the commercial bank would be left with lower of money.

The given statement is FALSE.

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