The Fed's most important and most frequently used tool of monetary policy is
A) moral suasion.
B) open-market operations.
C) changes in the discount rate.
D) changes in required reserve ratios.

Question

Quizplus · Accepted Answer

Open-market operations involve the buying and selling of government securities in the open market in order to adjust the reserves held by banks, which in turn affects the supply and demand of money and interest rates. This is the Fed's most frequently used tool of monetary policy. Moral suasion involves using persuasion and informal influence to try to change behavior, and changes in the discount rate or required reserve ratios are less frequently used tools of monetary policy.

The Fed's Most Important and Most Frequently Used Tool of Monetary