The Fed can use open market operations to regulate the money supply provided that
A)interest rates are low enough.
B)the inflation rate is low enough.
C)the money multiplier is stable.
D)the President or Congress does not object.

Question

Quizplus · Accepted Answer

Open market operations involve buying or selling government securities to increase or decrease the money supply. The effectiveness of this tool depends on the stability of the money multiplier, which determines the change in the money supply resulting from a change in reserves. Therefore, choice C is the best answer. The other choices are not directly related to open market operations.

The Fed Can Use Open Market Operations to Regulate the Money