Which of the following is the most frequently used tool the Fed uses to control the supply of money?
A) The discount rate.
B) The reserve requirements.
C) Open market operations.
D) The 30-year home-mortgage interest rate.

Question

Quizplus · Accepted Answer

Open market operations refer to the buying and selling of government securities by the Federal Reserve in order to affect the supply of money in the economy. This is the most frequently used tool by the Fed to control the supply of money. The discount rate (A) refers to the interest rate that banks can borrow from the Fed, while reserve requirements (B) refer to the amount of money banks are required to keep on hand as reserves. The 30-year home-mortgage interest rate (D) is not a tool used by the Fed to control the supply of money.

Which of the Following Is the Most Frequently Used Tool