ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -It has no role in controlling and managing the money supply. Thus, deposit insurance is not a tool used by the Fed to manage the money supply.

Detailed explanation-2: -The U.S. central banking system-the Federal Reserve, or the Fed-is the most powerful economic institution in the United States, perhaps the world. Its core responsibilities include setting interest rates, managing the money supply, and regulating financial markets.

Detailed explanation-3: -As the central bank of the United States, the Federal Reserve System has the responsibility of controlling the nation’s money supply. The Fed has three major tools that it can use to affect the money supply. These tools are 1) changing reserve requirements; 2) changing the discount rate; and 3) open market operations.

Detailed explanation-4: -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.