Answer:
a. What open market operation can the Federal Reserve use to achieve the lower target?
The FED would engage in an expansionary monetary policy that increases the money supply through purchases of bonds. This type of open market operations generally comes with a decrease in the FED's discount rate.
b. Given your answer to part (a)(i), what will happen to the price of government bonds?
Since the market rate will lower, the price of the bonds should increase.
