The Board of Governors of the Federal Reserve establishes monetary policy by

Question

Quizplus · Accepted Answer

The Board of Governors of the Federal Reserve establishes monetary policy primarily through three main tools: (1) setting reserve requirements, (2) altering the discount rate (the rate at which banks can borrow from the Fed), and (3) conducting open market operations (buying and selling government securities to influence the money supply). While altering the prime rate could indirectly impact monetary policy, it is not a direct tool used by the Federal Reserve. Additionally, the other options listed (altering bank profitability ratios and conducting international currency transactions) are not primary tools used by the Fed to establish monetary policy.

The Board of Governors of the Federal Reserve Establishes Monetary