During recent years, the Fed's focus has clearly been on the use of

Question

Quizplus · Accepted Answer

The Fed's key policy instrument has been the federal funds rate, which is the interest rate at which banks lend to each other overnight. The Fed sets a target for the federal funds rate and uses open market operations to achieve that target by buying or selling government securities in the market. This policy tool affects other interest rates in the economy, such as mortgage rates and car loan rates, which in turn influence spending and economic activity. The discount rate and the M2 money supply have also been important components of the Fed's policy, but they have not been the primary focus in recent years. Borrowed reserves are not a policy tool in themselves, but they can be used to affect the federal funds rate through the Fed's operations in the market. Therefore, the best choice is B, the federal funds rate.

During Recent Years, the Fed's Focus Has Clearly Been on the Use