Suppose the Fed wishes to make only a small change in the money supply.Which of its policy tools is it most likely to use?

Question

Quizplus · Accepted Answer

Open market operations refer to buying or selling government securities in the open market. This is the most commonly used tool for making small adjustments in the money supply, as it allows the Fed to control the amount of reserves in the banking system without disrupting the overall economy. The other tools listed, such as changing the prime interest rate or the required reserve ratio, are typically reserved for larger shifts in monetary policy.

Suppose the Fed Wishes to Make Only a Small Change