Does the Fed have good control over the money supply?
A)Yes, open-market operations generate exact changes in bank lending.
B)Yes, reserve requirements create new loans.
C)No, because of difficulties estimating the reserve ratio.
D)No, because of difficulties estimating the size of the excess reserves and cash holdings by the public.

Question

Quizplus · Accepted Answer

The Fed does not have good control over the money supply because it is difficult to estimate the size of the excess reserves and cash holdings by the public. While open-market operations and reserve requirements can influence the money supply, they are not exact and can be influenced by other factors outside of the Fed's control.

Does the Fed Have Good Control Over the Money Supply