Which of the following tools is used most often by the Fed for changing the supply of money?
A) Open market operations
B) Reserve requirement
C) Discount window
D) Interest rate

Question

Quizplus · Accepted Answer

Open market operations involve the buying and selling of government securities, which affects the reserves that banks hold. By buying securities, the Fed injects money into the banking system, increasing the supply of money. By selling securities, the Fed withdraws money from the system and decreases the supply of money. This tool is used most often by the Fed for changing the supply of money. Reserve requirement, discount window, and interest rate are also tools used by the Fed, but they are used less frequently for changing the supply of money.

Which of the Following Tools Is Used Most Often by the Fed