The Fed tends not to use discount policy as its principal tool in influencing the money supply since
A)discount loans do not affect the money supply.
B)it does not have as much control over discount loans as it has on open market operations.
C)it is prohibited from doing so by an act of Congress.
D)it prefers to use reserve requirements.

Question

Quizplus · Accepted Answer

The Fed has more control over open market operations compared to discount policy, as it can directly control the amount and timing of purchases and sales of securities in the market. Furthermore, discount policy has limited impact on the money supply as it only affects a small portion of the overall banking system's reserves. Therefore, the Fed prefers to use open market operations and reserve requirements as its primary tools for influencing the money supply.

The Fed Tends Not to Use Discount Policy as Its