Which tool does the Fed use most often to change the money supply?
A) Open market operations
B) The reserve requirement
C) The discount window
D) All of these are used with equal frequency.

Question

Quizplus · Accepted Answer

The Fed primarily uses open market operations to change the money supply. This involves buying and selling government securities in the open market in order to increase or decrease the amount of reserves in the banking system, which in turn affects the level of lending and the overall money supply. While the reserve requirement and discount window are also used by the Fed to influence the money supply, they are used less frequently and are considered secondary tools.

Which Tool Does the Fed Use Most Often to Change