Banks will have less incentive to make loans since they can instead earn higher risk-free interest payments from the Federal Reserve. Banks will have more incentives to get rid of reserves since they are now charged more for holding them. QUESTION 6 Assume the Federal Reserve becomes concerned that excess reserves start to massively enter the economy through loans and inflation might rise above target. Part 1: How should the Federal Reserve change the fed funds target rate? Part 2: Which Open Market Operation can achieve this? O Decrease ; sell government bonds Increase ; sell government bonds O Decrease ; buy government bonds O Increase ; buy government bonds QUESTION 7 The discount window is regularly used by banks during nor