Which of the following is a tool used by the Fed in the conduct of monetary policy?
A) changes in the prime rate
B) issuing new government bonds and retiring old ones
C) buying and selling corporate bonds
D) buying and selling federal government bonds

Question

Quizplus · Accepted Answer

The buying and selling of federal government bonds is a primary tool used by the Federal Reserve in the conduct of monetary policy. This is known as Open Market Operations and is used to influence the supply of money and credit in the economy. Changes in the prime rate (A) are often used by banks to adjust their lending rates, but this is not a tool used directly by the Fed in monetary policy. Issuing new government bonds and retiring old ones (B) is a function of the Treasury Department and does not directly impact monetary policy. Buying and selling corporate bonds (C) may be a component of Open Market Operations, but this is not a primary tool used by the Fed.

Which of the Following Is a Tool Used by the Fed