Asked by Paula marques on May 26, 2024
Verified
List two reasons why the Fed can not control the exact size of the money supply.
Fed
The Federal Reserve System, the United States' central bank, holds responsibility for implementing monetary policy.
Money Supply
The entire aggregate of monetary assets available at a certain period in an economy.
- Understand the function of the Federal Reserve in regulating the money supply by engaging in activities like buying and selling government securities.
- Appraise the impact that monetary policy tools have on the financial services sector and the wider economic context.
Verified Answer
NM
Najma MohamedMay 31, 2024
Final Answer :
1) The Fed can not control how much money households deposit at banks.
2) The Fed does not control how much banks lend.
These two facts mean the Fed does not have perfect precision in controlling the money supply.
2) The Fed does not control how much banks lend.
These two facts mean the Fed does not have perfect precision in controlling the money supply.
Learning Objectives
- Understand the function of the Federal Reserve in regulating the money supply by engaging in activities like buying and selling government securities.
- Appraise the impact that monetary policy tools have on the financial services sector and the wider economic context.