The Federal Reserve's major tool(s)to control the money supply is(are):
A) open market operations.
B) discount rate lending.
C) paying interest on reserves.
D) open market operations,discount rate lending,and paying interest on reserves.

Question

Quizplus · Accepted Answer

The Federal Reserve's three major tools to control the money supply are open market operations, discount rate lending, and paying interest on reserves. Open market operations involve the buying and selling of government bonds to influence the amount of reserves in the banking system. Discount rate lending enables the Fed to directly control the interest rate charged to banks for short-term loans, which can affect their willingness to borrow and lend. Paying interest on reserves provides an incentive for banks to hold excess reserves rather than lending them out, which can affect the overall level of lending and ultimately the money supply. Therefore, the best answer is D, as it includes all three major tools.

The Federal Reserve's Major Tool(s)to Control the Money Supply Is(are)