Which tool can the Federal Reserve use to control the money supply?
A) open market operations
B) the Term Auction Facility
C) paying interest on reserves
D) open market operations,the Term Auction Facility,and paying interest on reserves

Question

Quizplus · Accepted Answer

The Federal Reserve can use all three tools (open market operations, the Term Auction Facility, and paying interest on reserves) to control the money supply. Open market operations involve the buying and selling of government securities to influence the amount of reserves in the banking system. The Term Auction Facility allows the Fed to auction funds to banks in exchange for collateral, which can increase or decrease the amount of reserves in the system. Paying interest on reserves incentivizes banks to keep excess reserves with the Fed, which can also affect the money supply.

Which Tool Can the Federal Reserve Use to Control the Money