The monetary policy instrument the Federal Reserve choose to use is the

Question

Quizplus · Accepted Answer

The Federal Reserve uses the federal funds rate as its main monetary policy instrument. This is the interest rate at which depository institutions lend and borrow money from each other overnight, and the Fed can adjust this rate to influence broader economic conditions such as inflation and employment. The quantity of money (A) and required reserves rate (D) are related to the banking system's ability to create money but are not direct policy tools of the Fed. The exchange rate (B) is primarily influenced by international market forces rather than domestic monetary policy.

The Monetary Policy Instrument the Federal Reserve Choose to Use