Asked by Rhiannon Butler on Jul 12, 2024
Verified
The Federal Reserve System controls the money supply primarily through
A) open market operations.
B) accounting operations.
C) reserve requirement changes.
D) jawboning.
E) changing the discount rate.
Money Supply Control
The regulation of the amount of money in circulation by a central authority, typically a country’s central bank, to achieve economic objectives.
Open Market Operations
The buying and selling of government securities by a central bank in order to control the money supply and interest rates in the economy.
Discount Rate
The interest rate charged to commercial banks and other financial institutions for loans received from the Federal Reserve's discount window.
- Comprehend the processes by which the Federal Reserve regulates the money supply.
- Gain an understanding of the diverse tools employed in monetary policy, including but not limited to open market operations, the discount rate, and reserve requirements.
Verified Answer
ME
maleah evansJul 16, 2024
Final Answer :
A
Explanation :
The Federal Reserve System controls the money supply primarily through open market operations, which involve the buying and selling of government securities on the open market to increase or decrease the amount of reserves banks have available to lend. This, in turn, affects the interest rates banks charge for loans and ultimately impacts the money supply. The other options listed - accounting operations, reserve requirement changes, jawboning, and changing the discount rate - are also tools the Federal Reserve uses to influence the money supply, but open market operations are the primary method.
Learning Objectives
- Comprehend the processes by which the Federal Reserve regulates the money supply.
- Gain an understanding of the diverse tools employed in monetary policy, including but not limited to open market operations, the discount rate, and reserve requirements.