The tools of conducting monetary policy include:

Question

Quizplus · Accepted Answer

The required reserve requirement is the percentage of deposits that banks must hold as reserves. By changing this percentage, the central bank can control the amount of money that banks can lend out, and thus influence the overall supply of money in the economy.

Answer: B
 The prime rate is the interest rate that commercial banks charge their most creditworthy customers. By changing this rate, the central bank can influence the cost of borrowing for businesses and consumers, and thus affect their spending and investment decisions.

Answer: C and D are not correct choices
 Open market purchases of corporate stock are not a tool of monetary policy. This would be considered a fiscal policy action, which is the purview of government, not the central bank. Changes in tax rates are also not a tool of monetary policy, as they are also a fiscal policy action.

The Tools of Conducting Monetary Policy Include