Question

When the Fed is easing monetary policy it is: Increasing the Fed Funds Target Rate and...

When the Fed is easing monetary policy it is:

Increasing the Fed Funds Target Rate and selling bonds

Lowering the Fed Funds Target Rate and selling bonds

Lowering the Fed Funds Target Rate and buying bonds

Increasing the Fed Funds Target Rate and buying bonds

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Answer #1

When the Fed is easing monetary policy it is:

Lowering the Fed Funds Target Rate and buying bonds

Option C is correct

Easing monetary policy means providing liquidity to the economy. It is done by lowering the Fed Funds Target Rate. By doing so, businesses can borrow more money at lower interest rate.

By buying bonds, the Fed is injecting money into the economy. This is an easing monetary policy.

Option A and B are incorrect because the Fed buys bond, not sells to ease monetary policy.

Option D is incorrect because if the Fed increases the Fed Funds Target rate, it is a tightening monetary policy

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