Question

Suppose on any given day there is an excess supply of reserves in the federal funds market. If the Federal Reserve wishes to keep the federal funds rate at its current level, then the appropriate action for the Federal Reserve to take is a ________ open market ________, everything else held constant.

Answer 1

Answer:

... then the appropriate action for the Federal Reserve to take is a DEFENSIVE  open market SALE, everything else held constant.

Explanation:

Defensive open market operations are carried out to temporarily offset fluctuation in the market of securities (either too much or too little demand, or supply).

A defensive pen market sale will lower the supply of reserves without having to change the current interest rates. If it doesn't do anything, the interest rates will probably decrease.