Which of the following is true?
A)A side effect of the Fed's greater openness is that a larger volume of open market operations is needed to hit a given fed funds rate target.
B)The Fed believes that if it better communicates current and future policy moves, there will be less uncertainty.
C)The Fed uses M1 primarily in the execution of monetary policy because it is the aggregate most widely used to make transactions.
D)The Fed has become more secretive in recent years.

Question

Quizplus · Accepted Answer

The statement in option B is true. The Fed believes that better communication of its policy moves will lead to less uncertainty among market participants. The other options are false. Option A is false because greater openness would lead to less need for open market operations, not more. Option C is false because M1 is not the aggregate most widely used to make transactions; it is only a measure of money supply that includes currency and other liquid assets. Option D is false because there is no evidence that the Fed has become more secretive in recent years.

Which of the Following Is True