ECONOMICS
FEDERAL RESERVE
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
open-market operations
|
|
|
changes in reserve requirements
|
|
|
changes in interest rates
|
|
|
changes to foreign policy
|
Detailed explanation-1: -The Fed has traditionally used three tools to conduct monetary policy: reserve requirements, the discount rate, and open market operations. In 2008, the Fed added paying interest on reserve balances held at Reserve Banks to its monetary policy toolkit.
Detailed explanation-2: -Which of the following is NOT one of the Fed’s monetary policy tools? The answer is c) changing the coupon rate. The discount rate, the required reserve ratio is determined by the Fed and the open market operation is also conducted by FED.
Detailed explanation-3: -Of these three, buying bonds (an open market operation) is by far the most important and most effective way to increase the money supply. If the Fed wants to reduce the money supply, it needs to get banks to lend less.
Detailed explanation-4: -Overview of the Federal Reserve System. The Federal Reserve performs five key functions in the public interest to promote the health of the U.S. economy and the stability of the U.S. financial system. Conducting Monetary Policy. Supervising and Regulating Financial Institutions and Activities. 20-Jan-2023