The Fed influences the interest rate by using which of the following tools?
I.open market operations
Ii.taxes on bank accounts
Iii.changes in required reserve ratios
A)i only
B)ii only
C)iii only
D)Both i and iii
E)i,ii and iii

Question

Quizplus · Accepted Answer

The Fed influences the interest rate using the tools of open market operations and changes in required reserve ratios. Taxes on bank accounts are not used by the Fed to influence interest rates. Therefore, the correct choice is D which includes both i and iii as the tools used by the Fed to influence interest rates.

The Fed Influences the Interest Rate by Using Which of the Following