Which tool of monetary policy does the Federal Reserve use most often?
A) adjustments to long-term interest rates
B) open-market operations
C) changes in reserve requirements
D) changes in the discount rate

Question

Quizplus · Accepted Answer

Open-market operations are the most frequently used tool of monetary policy by the Federal Reserve. This involves the buying and selling of government securities to influence the level of reserves in the banking system, which in turn affects interest rates and overall economic activity. The other options, such as changes in reserve requirements and the discount rate, are also used but not as frequently as open-market operations. Adjustments to long-term interest rates are not a tool of monetary policy used by the Federal Reserve.

Which Tool of Monetary Policy Does the Federal Reserve Use