How does the Federal Reserve Board manage the nation's money supply?

Question

Quizplus · Accepted Answer

The Federal Reserve Board manages the nation's money supply by setting specific reserve requirements and establishing the discount rate. Reserve requirements dictate the amount of reserves that banks must hold and the discount rate affects the cost of borrowing from the Federal Reserve. By adjusting these two factors, the Federal Reserve Board can influence the money supply and economic activity. Choices A, C, and D are incorrect because the Federal Reserve Board does not prescribe specific fiscal policies, nor does it set business sector regulatory policies. The flexible discount rate is incorrect because the Federal Reserve Board does set the discount rate.

How Does the Federal Reserve Board Manage the Nation's Money