Which of the following monetary tools is the Fed most likely to use for carrying out its day-to-day management of the money supply?
A) Changes in the discount rate
B) Changes in tax rates
C) Changes in the reserve requirement
D) Open market operations
E) Changes in policy directives to its member banks

Question

Quizplus · Accepted Answer

Open market operations are the most commonly used monetary tool by the Fed to manage the money supply on a day-to-day basis. Through buying or selling government securities in the open market, the Fed can inject or withdraw money from the economy and influence interest rates. Changes in discount rates and reserve requirements are less frequently used, while changes in tax rates and policy directives to member banks are not monetary tools used by the Fed to manage the money supply.

Which of the Following Monetary Tools Is the Fed Most