Asked by Kaitlyn Foley on Jun 12, 2024
Verified
Which statement is true?
A) The main way the Fed controls the money supply is by raising or lowering the discount rate.
B) The Federal Reserve is barred by law from owning United States government securities.
C) The Federal Reserve insures bank deposits up to $100,000.
D) None of the statements are true.
Discount Rate
The Discount Rate is the interest rate set by central banks at which financial institutions can borrow reserves, influencing monetary policy and the money supply.
Federal Reserve
The central banking system of the United States, responsible for monetary policy, regulation of banks, and providing financial services to depository institutions.
U.S. Government Securities
Financial instruments issued by the United States Department of the Treasury to finance federal government spending, considered very low risk.
- Detail the responsibilities and position of the Federal Reserve in the context of U.S. monetary policy.
Verified Answer
MO
M O L E Y Y Y Y YJun 14, 2024
Final Answer :
D
Explanation :
The main way the Fed controls the money supply is through open market operations, not just by adjusting the discount rate. The Federal Reserve is not barred by law from owning U.S. government securities; in fact, it buys and sells these securities as part of its monetary policy operations. The Federal Deposit Insurance Corporation (FDIC), not the Federal Reserve, insures bank deposits, and the coverage limit has been increased to $250,000 per depositor, per insured bank, for each account ownership category since 2008.
Learning Objectives
- Detail the responsibilities and position of the Federal Reserve in the context of U.S. monetary policy.