What might the Fed do if the federal funds rate is higher th

What might the Fed do if the federal funds rate is higher than the target rate? How would it use its tools (required reserve ratio, discount rate, and open market operations) to achieve this target?

Solution

Federal open market committee regulates the interest rates through open market operations also known as fed funds rate.

When many people try and take out the money in one go and the bank doesnot have that much money. So at that time they take the money from the central bank at a rate and if this ratevis higher lending will be less and vice versa.

Money supply and liquidity is maintained by this only.