The policy lever most commonly used by the Fed is:
A) Changes in the discount rate.
B) Buying and selling bonds.
C) Changes in the reserve requirement.
D) Foreign-exchange operations.

Question

Quizplus · Accepted Answer

The most commonly used policy lever by the Fed is buying and selling bonds, also known as open market operations. This involves the Fed buying or selling government bonds in the open market, which can influence the money supply, interest rates, and overall economic activity. While the discount rate and reserve requirement are also used by the Fed to control the money supply, they are less frequently used compared to open market operations. Foreign-exchange operations are used to manage the value of the US dollar in relation to other currencies and are not directly related to monetary policy.

The Policy Lever Most Commonly Used by the Fed Is