The Fed's monetary policy strategy can be described as follows:
A) The Fed uses its policy tools to adjust intermediate targets that directly impact its operating targets in a way that allows the Fed to achieve its goals.
B) The Fed uses its policy tools to adjust operating targets that directly impact its intermediate targets in a way that allows the Fed to achieve its goals.
C) The Fed uses its operating targets to adjust its intermediate targets that directly impact its policy tools in a way that allows the Fed to achieve its goals.
D) None of the above.

Question

Quizplus · Accepted Answer

The Fed uses its policy tools, such as the federal funds rate, to adjust operating targets, such as the money supply and interest rates, that directly impact its intermediate targets, including inflation and employment, in a way that allows the Fed to achieve its goals. This is known as the Fed's operating procedures or "policy implementation framework."

The Fed's Monetary Policy Strategy Can Be Described as Follows