The main tool of monetary policy is
A) the discount rate.
B) capital gains taxes.
C) open market operations.
D) the reserve requirement.

Question

Quizplus · Accepted Answer

Open market operations refer to the buying and selling of government securities by the central bank to influence the money supply, which in turn affects interest rates and inflation. This is the main tool used by central banks to implement monetary policy. The discount rate, reserve requirement, and capital gains taxes can also be used as tools of monetary policy, but they are not as commonly used or as effective as open market operations.

The Main Tool of Monetary Policy Is