Which of the following explains why the money supply is not completely controlled by the Federal Reserve?
A) The actions of private individuals and banks can increase or decrease the money supply via the money multiplier.
B) The president can issue an executive order that can increase or decrease the money supply.
C) The Treasury has say over when the Federal Reserve can increase or decrease the money supply.
D) The actions of banks, which determine reserve requirements, can increase or decrease the money supply via the spending multiplier.
E) Congress has authority to veto any monetary policy enacted by the Federal Reserve.

Question

Quizplus · Accepted Answer

Private individuals and banks can lend and borrow money, which can increase or decrease the money supply through the money multiplier. The other options are incorrect. The president cannot unilaterally issue an executive order to control the money supply; the Treasury cannot control the Federal Reserve's actions; reserve requirements are set by the Federal Reserve, not banks, and influence the spending multiplier, not the money multiplier; and Congress cannot veto monetary policy enacted by the Federal Reserve.

Which of the Following Explains Why the Money Supply Is