ECONOMICS
MONETARY POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Open-market operations
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Changing the discount rate
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Setting reserve requirements
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Borrowing from foreign governments
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Detailed explanation-1: -Central banks have four main monetary policy tools: the reserve requirement, open market operations, the discount rate, and interest on reserves.
Detailed explanation-2: -The Federal Reserve, America’s central bank, is responsible for conducting monetary policy and controlling the money supply. The primary tools that the Fed uses are interest rate setting and open market operations (OMO).
Detailed explanation-3: -Key Takeaways The Fed uses three primary tools in managing the money supply and pursuing stable economic growth. The tools are (1) reserve requirements, (2) the discount rate, and (3) open market operations. Each of these impacts the money supply in different ways and can be used to contract or expand the economy.
Detailed explanation-4: -About the FOMC The Federal Reserve Act of 1913 gave the Federal Reserve responsibility for setting monetary policy. The Federal Reserve controls the three tools of monetary policy–open market operations, the discount rate, and reserve requirements.