To achieve its target when the federal funds rate is below the target range, the Fed could: Group of answer choices a)buy bonds. b)reduce the reserve requirement. c)increase the reserve requirement. d)cut the discount rate.

To achieve its target when the federal funds rate is below the target range, the Fed could:
Group of answer choices
a)buy bonds.
b)reduce the reserve requirement.
c)increase the reserve requirement.
d)cut the discount rate.

Answer

• c)increase the reserve requirement.
  Explanation:
  The federal funds rate is used to regulate loans by increasing or decreasing interest rates. When the federal funds rate is below the target range, more money will flow to the economy as more is borrowed at the low interest rates. To curb this, the fed can increase reserve requirement such that it will require banks to hold more money in the vault which leaves less to lend out as loans.