Monetary policy tools include:
A)Income taxes and the discount rate.
B)Open market operations and government spending.
C)The reserve ratio and the discount rate.
D)Open market operations and deregulation.

Question

Quizplus · Accepted Answer

The reserve ratio and the discount rate are both tools of monetary policy. The reserve ratio is the percentage of deposits that banks are required to hold in reserve, while the discount rate is the interest rate at which banks can borrow from the central bank. By adjusting these rates, the central bank can influence the money supply and interest rates in the economy. The other options listed are either fiscal policy tools (income taxes and government spending) or not directly related to monetary policy (deregulation).

Monetary Policy Tools Include