Which of the following is false?
A)If the Fed wants to expand the money supply, it could lower the discount rate.
B)The discount rate is a relatively unimportant monetary policy tool, mainly because member banks do not rely heavily on the Fed for borrowed funds.
C)Changes in required reserve ratios are such a potent monetary policy tool that they are frequently used.
D)If the Federal Reserve wanted to induce monetary expansion, it could reduce reserve requirements, but it cannot force the banks to make loans, thereby creating new money.

Question

Which of the following is false?
A)​If the Fed wants to expand the money supply, it could lower the discount rate.
B)​The discount rate is a relatively unimportant monetary policy tool, mainly because member banks do not rely heavily on the Fed for borrowed funds.
C)​Changes in required reserve ratios are such a potent monetary policy tool that they are frequently used.
D)​If the Federal Reserve wanted to induce monetary expansion, it could reduce reserve requirements, but it cannot force the banks to make loans, thereby creating new money.

Quizplus · Accepted Answer

Changes in required reserve ratios are not frequently used as a monetary policy tool due to their potent effect and the potential for causing significant disruptions in the banking system. Instead, the Federal Reserve often relies on open market operations and adjustments to the discount rate as more flexible and frequently used tools for influencing the money supply.

Which of the Following Is False