Which of the following tools of monetary policy is considered the most important on a day-to-day basis?
A) the discount rate
B) the reserve ratio
C) open-market operations
D) paying interest on excess reserves

Question

Quizplus · Accepted Answer

Open-market operations, which involve the buying and selling of government securities in the open market, are considered the most important tool of monetary policy on a day-to-day basis. This is because they are flexible, easily reversible, and can be used to adjust the money supply and influence interest rates. The discount rate and reserve ratio are also important tools, but they are typically used less frequently and in more targeted situations. Paying interest on excess reserves is a relatively new tool that is not yet widely used.

Which of the Following Tools of Monetary Policy Is Considered