The Fed uses the federal funds rate as the short-term monetary policy instrument to achieve the goals of price stability and full-employment output. And the Fed raises or cuts the federal funds rate (equivalently saying, decreases or increases money supply, respectively) through the Open Market Operation. In order to lower the interest rate, the Fed would need to __________ Treasury bonds through the Open Market Operation. a. sell b. buy

The Fed uses the federal funds rate as the short-term monetary policy instrument to achieve the goals of price stability and full-employment output. And the Fed raises or cuts the federal funds rate (equivalently saying, decreases or increases money supply, respectively) through the Open Market Operation. In order to lower the interest rate, the Fed would need to __________ Treasury bonds through the Open Market Operation. a. sell b. buy

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter24: The Influence Of Monetary And Fiscal Policy On Aggregate Demand

Section: Chapter Questions

Problem 3PA

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Question

The Fed uses the federal funds rate as the short-term monetary policy instrument to achieve
the goals of price stability and full-employment output. And the Fed raises or cuts the federal
funds rate (equivalently saying, decreases or increases money supply, respectively) through
the Open Market Operation. In order to lower the interest rate, the Fed would need to
__________ Treasury bonds through the Open Market Operation.
a. sell b. buy

Definition Definition Policy implemented by the central bank of a country (such as the Federal Reserve in the United States) to achieve certain macroeconomic objectives. Monetary policy is a supply-side macroeconomic policy that supervises the growth rate and money supply in the economy.

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