The most used monetary policy instrument used by the Fed is
A) open market operations.
B) changing the discount rate.
C) changing the reserve requirement.
D) issuing securities.

Question

Quizplus · Accepted Answer

Open market operations are the most frequently used monetary policy instrument by the Fed. This involves buying or selling government securities in the open market, which affects the availability of reserves in the banking system and ultimately influences short-term interest rates. The Fed can use open market operations to stimulate or slow down the economy as needed. While changing the discount rate and reserve requirement are also used by the Fed, they are not used as frequently or as directly as open market operations. Issuing securities is not a monetary policy instrument used by the Fed, as it is typically done by the Treasury Department to finance government spending.

The Most Used Monetary Policy Instrument Used by the Fed