Which of the following statements accurately describes the Fed's control of discount policy?
A) It controls discount policy more completely than it controls open market operations.
B) It must abide by discount rates set by Congress.
C) It controls discount policy less completely than it controls open market operations.
D) It controls discount policy completely, just as it controls open market operations.

Question

Quizplus · Accepted Answer

The Fed controls discount policy less completely than it controls open market operations. While the Fed sets the discount rate, individual Reserve Banks can choose whether or not to participate in discount window lending, meaning that the control is not complete. In contrast, the Fed has more direct control over open market operations. Option A and D are incorrect because the Fed does not control discount policy more completely or completely as it does open market operations. Option B is incorrect because Congress does not set discount rates; it is the responsibility of the Fed.

Which of the Following Statements Accurately Describes the Fed's Control