Which of the following is the most flexible of the Fed's tools for implementing monetary policy?

Question

Quizplus · Accepted Answer

Open market operations refer to the buying and selling of government securities by the Fed in the open market. This tool is the most flexible as it allows the Fed to directly control the supply of money in circulation by adjusting the quantity and type of financial securities it purchases or sells. Changes in the fed funds rate, required reserve ratio, and discount rate are more blunt instruments that affect the cost of borrowing and can have unintended consequences. Private placements are not a tool of the Fed for implementing monetary policy.

Which of the Following Is the Most Flexible of the Fed's