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To cope with Covid-19, the Fed lowered the interest rate to almost zero
To cope with Covid-19, the Fed lowered the interest rate to almost zero. How did the Fed accomplish this goal? O through open market purchase through open market selt Requiring all financial institutes in the U.S. to use the federal funds rate to lend / borrow money To print money so that there will be more money supply in the market.
Expert Solution
To cope with Covid -19, Fed lowered the interest rate to almost zero. In order to accomplish this goal,Fed need to increase the money supply.
An increase in money supply shifts the money supply curve to the right. A rightward shift of the money supply curve leads to decrease in interest rate.
In order to increase money supply, Fed should conduct open market purchase of bonds and government securities.
Hence, Fed accomplish this goal through open market purchase.
Answer: Option (A)
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