The best instrument for controlling week-to-week changes in the money supply is

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Open-market operations are the best instrument for controlling week-to-week changes in the money supply. This involves buying or selling government securities in the open market to increase or decrease bank reserves and, therefore, the amount of money in circulation. The Federal Reserve can easily adjust the amount of securities it buys or sells to achieve the desired level of money supply, making it a more precise tool than the other options listed. The required reserve ratio affects the ability of banks to lend money, but it is a less flexible tool because it is set by regulation and can only be changed periodically. Moral suasion and the discount rate are also less precise tools because they rely on voluntary cooperation from banks or adjustments to the cost of borrowing, respectively.

The Best Instrument for Controlling Week-To-Week Changes in the Money