Which of the following statements about Fed management of the money supply is correct?
A)Over the past thirty years, the Fed has always stayed within its pre-announced target rates for growth in M2.
B)The most common tool used by the Fed is a change in the required ratio of reserves to deposits.
C)The rate at which the Fed lends money to banks is called the "Federal Funds rate."
D)The Fed must report each week to Congress on the conduct of monetary policy.
E) none of the above

Question

Quizplus · Accepted Answer

The statements provided contain inaccuracies regarding the Federal Reserve's management of the money supply. For instance, the Fed does not always stay within its pre-announced target rates for M2 growth, changes in the required reserve ratio are not the most common tool (open market operations are), the Federal Funds rate is the rate at which banks lend to each other overnight (not the rate at which the Fed lends to banks), and the Fed does not report weekly to Congress on monetary policy.

Which of the Following Statements About Fed Management of the Money