The monetary policy instrument the Federal Reserve choose to use is the

Question

Quizplus · Accepted Answer

The Federal Reserve uses the federal funds rate as its primary monetary policy instrument. This is the interest rate at which banks can borrow or lend funds overnight in the federal funds market. The Fed can adjust this rate to influence borrowing and lending among financial institutions, which in turn affects the overall level of interest rates in the economy and the growth of credit and money supply. The other options - required reserves rate, exchange rate, and quantity of money - can also be influenced by Fed policies, but they are not the direct target of its control.

The Monetary Policy Instrument the Federal Reserve Choose to Use