The most frequently used tool of monetary policy is:
A) open-market operations.
B) changes in the discount rate.
C) changes in reserve requirements.
D) changes in interest rate paid on reserves

Question

Quizplus · Accepted Answer

Open-market operations, which involve the buying and selling of government securities by the central bank in the open market, are the most frequently used tool of monetary policy. This is because it is a flexible tool that allows the central bank to adjust the money supply and interest rates quickly and easily, and to target specific sectors of the economy if necessary. Changes in the discount rate and reserve requirements are also used, but these tools are less flexible and more difficult to implement. The interest rate paid on reserves is not typically used as a tool of monetary policy, although it can have an effect on the broader economy.

The Most Frequently Used Tool of Monetary Policy Is