In making monetary policy the Fed currently
A)Increases the money supply at a fixed rate each year.
B)Has adopted the monetarist view and "leans against the wind."
C)Focuses on the federal funds rate.

Question

Quizplus · Accepted Answer

The Fed currently focuses on the federal funds rate as a tool to implement monetary policy. The federal funds rate is the interest rate at which banks and other financial institutions lend and borrow reserve balances overnight from each other. By changing the federal funds rate, the Fed can influence the cost and availability of credit, which in turn affects spending, investment, and ultimately inflation and economic growth. The Fed does not have a fixed rate of money supply growth, nor does it exclusively follow the monetarist view. "Leaning against the wind" refers to the Fed's strategy of preemptively adjusting interest rates to counteract potential inflation or asset bubbles, rather than waiting for proof of their emergence. While this has been a consideration in the past, it is not the exclusive focus of the Fed's current monetary policy.

In Making Monetary Policy the Fed Currently