The Federal Reserve has direct control over:
A) the monetary base.
B) M1.
C) M2.
D) Each of these answers is correct.

Question

Quizplus · Accepted Answer

The Federal Reserve has direct control over the monetary base, which includes currency in circulation and reserves held by banks at the Fed. The Fed can adjust the monetary base through open market operations, setting reserve requirements, and changing the discount rate. While changes in the monetary base can ultimately affect the money supply (M1 and M2), the Fed does not have direct control over these broader measures of the money supply.

The Federal Reserve Has Direct Control Over