Ther Fed creates a lower and upper bound for the federal funds rate and the incentives that drive financial institutions to move the federal funds market to that target. a. Select the tool(s) the Fed uses to incentivize financial institutions to move the federal funds market to the targeted federal funds rate. The Fed buys and sells government bonds. lends directly to banks through the discount window. borrows money overnight from financial institutions. pays banks interest on excess reserves. b. Select the tool(s) the Fed uses to create a lower bound for the federal funds rate. The Fed lends directly to banks through the discount window. borrows money overnight from financial institutions. pays banks interest on excess reserves