The fed uses open market operations to alter ff market condi

Solution

The fed decrease the money supply in the market and reduces the reserve with the banks. With a lower reserve in hand, the federal fund rates increase.

Federal fund rates are the amount of reserve the banks lend to other financial institutions for overnight basis. The more excess reserve they have the lower the FFR will be. The Fed uses the open market operations like selling the bonds in the market i.e. giving the people bonds and taking the money. it reduces the money supply in the marker and reserve with the bank. With less reserve, the FFR increases. We call this contractionary monetary policy.